Housing demand in Kenya is estimated at 150,000 units per year and it is steadily rising to 200,000 units. Our building industry currently delivers 35,000 units per year, a paltry 20% leaving a deficit of 80%. This means that demand for housing is insatiable and will increase exponentially in the years to come. Over the last 10 years, residential real estate values in Nairobi have increased 3 to 4 fold while residential plots have increased 5-8 fold. If you had bought a house ten years ago, you would be three to four times richer. If you had bought land same time and held onto it for speculation purposes, today you can sell it for five to eight times the price you bought it. No inflation can rob you of your new riches.
This monumental growth is replicated for industrial as well as commercial properties especially along the major corridors of Nairobi such as Mombasa Road, Ngong Road, Waiyaki Way, and the satellite commercial centers such as Upper Hill.
The good thing with real estate is that its demand is a derived one. This means that if the population rises, more real estate is needed to house the increased population. Right now as we plan to improve tourism, agriculture, trade, manufacturing, BPO and financial services as provided in the Vision 2030, real estate are marked as the flagship projects. We need more resort cities, hotels, ports, markets, industrial and BPO parks.
As you consider venturing into real estate, you should note that the prices of building materials are also on the rise. The cost of finance has also gone up with interest rates rising and the shilling depreciating against the dollar. The cost of land is also quite high as investors shift from the poorly performing equity markets to real estate. It is therefore important to carefully consider your project and compare it with various development options. Some of the investment tools you can use include; payback period, return on investment, net present value, internal rate of return and profitability index which I have explained in this link.