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Summary of Kenyan Housing Sector

1. Market Outlook

1.1 Residential Market

The residential market in both the mid and high-end sectors is vibrant and prices have now recovered from the impact of the global economic crisis and the post-election
skirmishes of early 2008. Houses in gated compounds and apartments have seen greater demand than single stand-alone homes. The current trend is to develop out-of-town
integrated communities, targeting mainly the middle class; examples include The Hub-Karen and Two Rivers Malls.

1.2 Retail Market

Nairobi continues to be home to the most modern shopping malls in the country, with new entrants being Galleria Shopping Mall and Greenspan Mall. Mombasa and Kisumu
have also witnessed retail developments including the City Mall in Nyali, Mombasa and United Mall and Mega City in Kisumu.
The retail sector has benefited from a resilient economy and a growing middle class population.

1.3 Office Market

The promulgation of the new constitution led to a recovery in confidence and improved optimism about the future of Kenya from both local and international investors. The major decentralised office nodes of Westlands, Upperhill, Riverside, Karen and Gigiri have continued to witness a considerable amount of prime office development, notably
14 Riverside, Delta Corner and KMA Centre. The new accommodation has been let at a steady rate and Grade A office rents have increased.

1.4 Industrial Market

The industrial market has seen the increased development of business parks targeting light industrial users, including Business Processes Outsourcing and Call Centres. This
is primarily as a result of Kenya’s connection to The East African Marine System (TEAMS), a submarine fibre optic cable giving the country true broadband capability
for the first time. Notable projects which have been completed include Sameer Business Park, Tulip House and Royal Business Park, all on Mombasa Road. The government has also acquired 1,000 acres along Mombasa Road, where it proposes to construct an ICT hub expected to attract both internal and external investment and enhance the ICT subsector.

   Prime Rents  Prime Yield
 Residential  US$4,000 per month*  7%
 Retail  US$31.0 per sq m per month  11%
 Offices  US$10.0 per sq m per month  9%
 Industrial  US$3.6 per sq m per month  13%

* 4 bedroom executive house – prime location
Source: Knight Frank LLP

2. Market Status

The Kenyan urban housing sector is characterized by inadequate affordable and decent rental housing options, low-level of home ownership (about 16%) extensive and
inappropriate dwelling units including slums and squatter settlements. It is estimated that while a total of 150,000 housing units are required annually in the urban areas to cater for the backlog, only about 30,000 units are developed every year. This scenario creates a great opportunity for investing in housing in our country.

Property values have increased by 3.10 times since 2000. The index shows a property price rise of 1.3% in the first quarter of 2012 and a 1.4% rise in the last year.
The annual average is representative of the average price of all properties offered for sale in Kenya. The average value for a property has gone from KShs. 7.1 million in December 2000 to KShs. 22.3 million in March 2012. The average value for a 4-6 bedroom property is currently KShs. 30.5 million while the average value for a 1-3 bedroom property is currently KShs. 10.9 million.

The Mix by Year is a measure of the percentage that each type of property represents in the market. In 2001, apartments took up 23.5% of the market, Town Houses 24.5% of the market and Stand alone houses 52% of the market. In 2012 however, apartments took up 43.6% of the market, Town Houses 26.9% of the market and Stand alone houses 29.5% of the market.

Source: Hass Consult

2.1 Property Market Trends

Demand for housing, particularly in urban areas, has continued to rise without requisite movement on the supply side. This has pushed prices up making the houses affordable to but a few. Scarcity of well-located land in the city of Nairobi for example, has directed housing development along Mombasa and Kangundo Roads where land is still available at relatively lower prices.

In the process, the redevelopment option has been pursued by various developers. There is heightened activity in the development of apartments, to meet the ever increasing demand, in hitherto single family residential neighbourhoods of Kilimani, Kileleshwa, Lavington, with a view to minimise the costs of running single family residential homes (security/ gardener/ground maintenance/garbage collection/utility bills etc).

Source: National Housing Corporation