Affordable land stirs investment in Ruiru, Ruaka
Ruaka and Ruiru are still the preferred destinations for land investment by developers and the rising middle class, a land sector’s performance report for the period 2019/2020 focusing on the Nairobi Metropolitan Area shows.
Nairobi Metropolitan Area Land Report 2020 released by Cytonn Real Estate Investment Company singled out these two satellite areas, saying that despite an overall slowdown in real estate development attributed to tough economic environment, reduced supply of affordable development land in areas close to the Nairobi CBD resulted in demand for the same in satellite towns.
“Unserviced land in satellite towns such as Ruaka recorded a capital appreciation of 3.8 per cent year on year.
This is attributable to growing demand for land in these areas fuelled by demand for housing by the growing working population as these areas act as Nairobi’s dormitory, coupled by the improving infrastructure,” said the report.
Unserviced land in Ruiru recorded a 6.2 per cent capital appreciation (land value) in 2019/2020 period.
This compares to a 6.5 per cent recorded in the previous period of 2018/19, which is a decline in growth.
In Ruaka, land value appreciation stood at 5.2 per cent during the period under review, compared with 4.0 per cent reported in the 2018/2019 period, which reflected a growth.
“The capital appreciation (generally in all Nairobi Metropolitan Area’s satellite towns) is attributed to increased demand driven by the relatively affordable land at approximately Sh15 million asking land price per acre and provision of infrastructure by the developers,” said the report.
Compared to unserviced land in the same areas, the asking price of serviced land recorded a slower appreciation due to decreased demand as buyers were not willing to pay a premium for the services provided, thus opt for unserviced land.
Ruiru recorded the highest appreciation rate in the serviced land category at 5.8 per cent attributable to increased demand for land in the area from developers looking to cater for the mid-income and student population housing.
“This has been as a result of the push for individuals to move to satellite towns where housing is relatively affordable, in addition to the mushrooming tertiary institutions,” says Cytonn chief executive officer, Edwin Dande.
Asking land prices in Athi River recorded a 10.8 per cent points growth in the capital appreciation, attributed to growing demand for land fuelled by the relatively affordable land prices at Sh12million per acre compared to the node’s average of Sh15 million per acre.
The focus by developers has been a drive to venture into affordable housing as the area has an expanding industrial and manufacturing base driving demand for housing, and the opening up of the area following its administrative role as the headquarter of Mavoko Division in Machakos county.
Dande is optimistic despite the current slowdown in real estate development activities saying that performance of the land sector will thrive.
The sector will be cushioned by the growing demand for development land, especially in the satellite towns, says Dande.
“The reason is developers will strive to drive the government’s Big Four government agenda on the provision of affordable housing,” says the Cytonn boss.
Improving infrastructure such as the ongoing construction of the Western bypass and increased demand for development land by the growing middle-income population, is the other factor.
“We expect constrained credit supply to cripple real estate development, as financiers such as banks aim to limit exposure amidst increasing loan deferrals and defaults, in the wake of an economic slowdown attributed to the ongoing Covid-19 pandemic,” says Dande adding: “Also we expect continued commitment by the government to its infrastructure developmental agenda, thus opening up areas for development thus boosting land value.”
In the 2020/2021 budget, the infrastructure sector budget allocation stands at Sh172.4 billion, Sh58.8 billion lower than the previous allocation, which is expected to slowdown infrastructural development.
In Low Rise Residential Areas areas zoned with villas, townhouses and maisonettes, Karen was the best performing sub-market with a capital appreciation of 5.6 percent, attributed to relatively high demand for land.
This is supported by availability of good infrastructure, proximity to amenities and relatively low asking land prices at Sh56.4 million compared to market average of Sh84.2 million per acre,
Spring Valley recorded a 9.5 per cent increase in capital appreciation, attributed to a growing demand for development land in the area boosted by the growth potential of the area, ease of accessibility and proximity to business nodes such as Westlands
HassConsult said in its first quarter this year report Covid-19 slowed down land transactions.
“This is in addition to the general slowdown in economic activity that the pandemic has caused, which could potentially further see adverse activity in the sector,” said HassConsult Head of Research and Marketing at Hass Consult Sakina Hassanali.
“The Covid-19 pandemic has left some landowners unexpectedly with limited liquidity and as a result we may see a bigger supply in land moving forward,” said Hassanali.