Even before Nakuru officially gained city status last year, businesses – including real estate companies – were already advertising their products and services with the slogan “city”.
Although the city’s status was confirmed by President Uhuru Kenyatta on December 1, some investors are still waiting to see if the status will have an effect on the cost of doing business in the region.
For Kenya’s real estate sector, the market is notorious for its explosive reaction to such news, where land and house prices would just triple with the revelation of a development project like road or railway in the area. .
Johnson Ndege, a development consultant, says it may be a year before major price changes show up.
“Kenya is a speculative market, so if you have unused land (in Nakuru), with all this process coming, it is likely to attract investors. Demand will be high, hence the price increase he says.
He says the change in real estate prices would happen once the county comes up with a city plan and begins to rezone or reclassify areas if there were no speculative trends.
According to Ndege, the zoning depends on the area one will enter, noting that it will lead to price changes.
He said a city attracts more funding from development partners such as the World Bank and also through tariffs formerly conferred with city status.
“More properties are likely to come into tariffs. They are also likely to revise their rating role to reflect the status of the city and in doing so, this funding is then directed towards infrastructure development, rezoning and replanning,” says Ndege.
According to Ndege, the huge cash invested in infrastructure will automatically influence property prices upwards.
Replanning and rezoning also changes the use of the property. For example, a residential property may end up being converted into offices. Some areas will also be reclassified and this, says Ndege, will increase the value of the property.
“Now that it’s a city, it will be marketed as such to the world and it will start attracting investors who will see it as a city and not a city,” he says.
Developers with broad interests in Nairobi and its satellite towns of Machakos, Kajiado and Kiambu counties are among those eyeing investments in Kenya’s newest town.
Optiven Group Managing Director George Wachiuri said the company had recently opened an office in the Rift Valley region and had a presence in Nakuru, where it aims to invest in affordable housing.
This is despite the fact that the Nakuru market is smaller than that of metropolitan Nairobi, which has a huge population of over nine million people and extensive infrastructure. Nairobi alone has around five million inhabitants.
Wachiuri says Nakuru’s declaration as a city was an indication of drastic changes in the development, infrastructure, outlook and general emotional feeling of the people.
“This means that land prices will increase significantly and more so in areas close to the city. Zoning will be useful as the city takes shape.
He says his company plans to get into affordable homes.
“The demand for land from various users, both government and private sector, will push up land prices,” says Wachiuri.
The price change, according to Wachiuri, is expected to occur in the medium term as the government works on various regulations and municipal regulations.
This, he explains, may not be a priority this year, citing the upcoming polls to be held on August 9. “So we’re looking at a good change between five and 10 years for real results to be seen on the pitch,” Wachiuri says.
“The development of the city requires good income to repair the infrastructure.”
According to an analysis by Username Properties, another real estate company, land prices in Nakuru are appreciating by 12.7%.
“This means buyers of speculative land in Nakuru benefit from 12.7% per annum without developing vacant land,” Username says in an analysis published in August 2021 ahead of the city’s status announcement.
The analysis cites projects such as the expansion of the Nakuru-Mau Summit road, the upgrading of the Nakuru airstrip to international standards and the upgrading of city roads by the Urban Authority and rural Kenya as some of the factors likely to influence the real estate sector in the county.
Username Properties notes that there is a demand for office space in the county. Compared to Nairobi where it costs Sh15,000 to get a license for a small shop, opening the same in Nakuru costs Sh4,000.
“Also, transport costs in Nairobi are higher than in Nakuru. All of this has increased the demand for office space in Nakuru as businessmen and women seek the best location,” the company explains.
While mortgage costs are high across the country, Nakuru’s advantage is that it has relatively affordable property prices compared to Nairobi, according to the company.
“As such, an average Kenyan can take out a mortgage or house loan and invest in a property product in Nakuru and pay it off in a few years compared to Nairobi.”