Sh5b Pangani housing project resumes after developer secures funding

The construction of the Pangani Affordable Housing Project which had stalled for two years, has resumed after the developer managed to secure new funding.

The project, which had been delayed for 26 months, had caused anxiety among some homeowners who had committed a deposit towards ownership of the units.

A visit to the site in Nairobi by Real Estate confirmed the resumption of the construction with new dates of completion expected to be released.

Initially, the project was projected to be completed by June 2023.

However, financial challenges arising from the fast pace of the project as explained to Real Estate caused the developer, Tecnofin Kenya Ltd, to run out of cash.

A recent attempt through the Nairobi City County Assembly to facilitate access to funding failed to materialise after the court ruled against using the project’s title as security.

David Sirma, who is in charge of administration at Tecnofin, confirmed that the contractor was back on site on September 2, 2024. “We have resumed construction. At the moment, we are working with a consultant who will guide us on the new date of completion depending on the remaining work,” he told Real Estate.

Some of the work that is taking place this month includes servicing the crane and other equipment, scaffolding and brushing in some blocks, removal of debris, pumping water, painting, and fixing windows.

The Pangani Affordable Housing Project, while it falls under the Nairobi City County, is among the affordable housing projects under the government where individuals can own units at subsidised prices as a result of a Public Private Partnership (PPP) between developers and the State

The project, valued at Sh5 billion as of 2022, consists of 1,562 units where 952 are under affordable housing while 610 are at market rate.

The market rate units are going for Sh9 million but initially used to cost Sh7.5 million. A one-bedroom affordable housing unit costs Sh1 million. A two-bedroom goes for Sh2.5 million while a three-bedroom costs Sh3 million.

County Assembly

They are offered with basic quality finishes with room for owners to customise the units to their liking. “The project is about 80 per cent sold,” added Mr Sirma.

On April 19, 2023, the Nairobi City County Assembly passed a motion to allow title deeds of the Nairobi Urban Renewal Projects, where the Pangani Affordable Housing Project falls, to be used as security by developers to access funding.

“This County Assembly resolves to approve the resolution of the County Executive of April 18, 2023, that Nairobi City County Government title deed for the Pangani Estate Urban Renewal project site be deposited with the requesting financial institution, as simple non-collateral deposit, to facilitate the joint venture development partner to raise the necessary finances for the projects to be accomplished,” reads the motion of the Nairobi City County Assembly. The motion was moved by the Nairobi City County Assembly majority leader Peter Imwatok. 

It was informed by the desire of the county to deliver the project as it holds 99 per cent of the special purpose vehicle (SPV), with the developer holding one per cent, formed to implement the project.

This agreement dictates that the county provides land while the developer raises the cash.

“That to raise the required funds, financial institutions have required the private developers to provide collateral to provide the finances. Recognising that, at its sitting held on April 18, 2023, the County Executive Committee resolved that Nairobi City County Government title deeds for the Urban Renewal project sites be deposited with financial institutions to act as simple non-collateral deposits to enable the joint venture development partners to raise finances necessary to implement the Urban Renewal projects,” the motion reads.

However, a civil society group, Sheria na Watu, filed a case with the Environmental and Lands Court on May 10, 2023, against the Nairobi City County Government and the Nairobi City County Assembly arguing that the move by the latter is unconstitutional.

“A declaration, and is hereby issued that the resolution by the 1st Respondent (Nairobi City County Government) contained in its letter dated April 18, 2023, Ref NCC/CS/PAA/297 and approved by the 2nd Respondent (Nairobi City County Assembly) on April 19, 2023, to have developers of the Urban Renewal Projects including the Pangani Urban Renewal project to deposit title deed for the said land as collateral with a financial institution violates Article 67(2) for want of sanction, authority and/or consent by the third Respondent (National Lands Commission),” reads the judgment by the court.

The court heard that the National Lands Commission was never involved in the process yet it is the custodian of public land.

“It was contended that prior to the approval of the said resolution by the second Respondent, no authorisation was obtained from the third respondent to offer the title of the intended Pangani Urban Renewal Project as collateral, for the benefit of the developers, who are private entities,” reads the November 2023 judgment reads.

Article 62 (2) of the Constitution states that public land shall vest in and be held by a county government in trust for the people resident in the county and shall be administered on their behalf by the National Lands Commission.

As this judgment touches on Nairobi City County Urban Renewal projects beyond the Pangani Affordable Housing Project, questions now emerge on the future of other sites already earmarked for the same.

Real Estate asked this question, in the context of the Pangani Affordable Housing Project, to Principal Secretary State Department for Housing and Urban Development Charles Hinga who responded by saying the project has resumed.

“Construction has resumed,” he said adding that it is under the Nairobi City County.

When reached for a comment, the incoming Built Environment and Urban Planning County Executive Committee Member Patrick Mbogo said he is yet to familiarise himself with the issue due to a recent reshuffle as he is barely a month in office.

“The office is in the process of a handover,” he said. The Chief Officer in charge of Urban Development and Planning Patrick Analo, whose affidavit was part of the case, could not be reached for comment.