How quality of land is slowing down development of housing units units

Whenever affordable housing is discussed, the cost of land is always blamed for the skyrocketing prices of units. Several attempts have been made by both the private sector and the government to ease this pain point. Yet here in, maybe an opportunity, at least according to Kenya Mortgage Refinance Company (KMRC) Chief Executive Johnstone Oltetia.

As the government pushes to deliver the much-needed two million units it promised to develop, the quality of land available for construction stands out as a major obstacle to the developers, particularly in the private sector.

The situation is not being made any easier by the population pressure for a market whose urbanisation rate is 4.3 per cent.

Developers and financiers speak of land that is without the horizontal infrastructure, proper records and too fragmented.

Director of Credit Operations at Shelter Afrique Development Bank Chris Chege speaks of frustration with developing sites that have no services such as sewer, water and roads which forces the developer to do them. As such, once the project is done, the developer will add these costs to the units.

“Is there a way the government can also help in terms of: The land that is earmarked and approved for development, at least the infrastructure is put up?” posed Chege during this year’s KMRC Affordable Housing Conference.

“If the infrastructure has been taken care of by the developer, then have a concession method so that they do not put the same cost back into the development.”

But Oltetia views this challenge as an opportunity. At least, from the cost perspective. If an area is well developed with horizontal infrastructure, then units will be expensive.

Population growth

“Infrastructure and housing development are critical. Sometimes the question is, which comes first? In certain cases, at least from my understanding, infrastructure needs to come first and form the basis for development,” he said.

“But in certain cases, we find the houses come before and that becomes a little problematic.”

Oltetia said the flipside of this is affordability.

“If infrastructure and the cost of land are known to contribute 40 per cent of the value or the cost of the housing unit, and that is significant, when you remove it, then housing becomes affordable,” he said.

As the population grows, with more people moving into the cities and urban centres and the craze behind the acquisition of plots even in far-flung areas, the provision of this critical infrastructure becomes even more difficult.

This is because land ownership has been fragmented.

“Fragmented land ownership makes it difficult to provide bulk infrastructure,” says the Managing Director of HFC Bank Peter Mugeni. “A lot of estates you see around Nairobi are gated communities where it is very easy to arrange for roads, water and other infrastructure to be brought on site.”

Mugeni says there is this innate desire among Kenyans to build and own their homes instead of buying. In such a case, master-planned properties could be an alternative. This will allow individuals to build their own houses according to their specifications, something that HFC is doing.

“What we have done is get large parcels of land, plan, subdivide and provide built plans and housing typology to allow Kenyans who are choosy to provide their own housing,” he says.

Mugeni says the lack of masterplans gives rise to poor quality estates.

Digitising land records

“If you go to any county headquarters, including here in Kisumu, you will find the units available do not fit the best quality of housing, as sanitation and amenities are not up to scale,” he says.

A game changer for developers, however, would be digitising land records. It is where the country lags when it is compared to smaller economies like Rwanda.

Lucy Owano, Affordable Housing Project Manager, FSD Kenya, says Rwanda even has pre-approved plans.

“For example, if you want to build using specific plans that have already been pre-approved by the Rwanda Housing Authority, then you consider your plan approved,” she says. This eliminates the processes and complexities around approval.

She took note of the progress under Ardhi Sasa, a national government project to digitise land records.

“But most counties are still trying to set up their digital systems. We have some that are still doing manual systems,” she said.

The Cabinet Secretary for Lands, Public Works, Housing and Urban Development Alice Wahome, who was part of the conference, said while Kenya is making progress in the digitisation of land records, Rwanda has the advantage of size.

“Their country is smaller than ours, but that is not really where the difference comes from,” she said. “They engaged the World Bank and went ahead of us and had a holistic automation program. I am aware their records are better organised than ours.”

Wahome said about three other countries on the continent that are ahead of Kenya in land records digitisation and are doing better.

“That is what we hope to achieve with our program,” she said.