The Nairobi Metropolitan Area has recorded an improvement in performance in the lands sector, with an average annual price appreciation coming in at 3.2%. This is according to a report released by research company Cytonn in July this year, which further indicates that the average 10 year selling price of land has also increased per acre from Kshs 47.5 million in 2011 to Kshs 126.8 million between 2021/22.
This performance, the report shows, has mainly been driven by the increased demand for un-serviced land in satellite towns of the Nairobi metropolitan. The demand of this land is as a result of adequate infrastructural developments, proximity to amenities such as malls, education institutions. Positive demographics are also fueling the demand.
“Land sector in the Nairobi Metropolitan Area (NMA) has continued to exhibit resilience, as evidenced by its consistent improvement in performance despite facing challenges such as the Covid 19 pandemic as well as oversupply in select real estate sector such as commercial office and retail sectors,” the research firm notes in its report.
Stakeholders in the real estate have taken advantage of the government’s continued focus on infrastructural developments which are aimed at improving the economy’s performance. This in turn has benefitted the sector by improving connectivity, thereby bolstering demand and uptake, particularly in satellite towns and opening up areas for investment, ultimately increasing property prices.
Notable projects that have contributed to this impact include the dualling of the 27.8KM, Nairobi Eastern By-pass road, the 27.1KM Express way road project, dualling of Ngong road, the construction of Ngong Suswa Road, the Nairobi Maai Mahiu Standard Gauge Railway (SGR) among others.
Additionally, the report has indicated high population which stood at 1.9% per year by 2022 as well as urbanization that was at 3.7% per year other factors that has impacted on how the metropolitan area behaves in land prices. Recently, the government rolled out the affordable housing projects. This initiative has continued to take shape and several projects have already been commissioned in line with the government’s housing agenda. Subsequently, there has been an upward demand for development
“Inadequate land within Nairobi Commercial Zones has driven developers to source for development land in the satellite towns of Nairobi, thus driving demand for land in these areas upwards. Demand for land has also been fueled by their affordability, compared to Nairobi suburbs,” the report records.
According to a Markets Review Report, the average asking land price per acre for un-serviced land in satellite towns came in at Kshs 15.4 million significantly lower than 397.3 per acre in Nairobi suburbs.
And even projections that have been provided in the report suggests that the future is promising for investors who sets their eyes on these areas. For example, the continued efforts to digitize the land records through the National Land Information Management System (NLIMS), which is also known as Ardhi Sasa. This program was launched in 2021, and will ensure enhanced and streamlined land transaction processes by reducing protracted timelines.
The investment opportunities in the satellite towns majorly lies in Juja, Athi River, Utwala and Ngong submarkets. These areas registered the highest capital returns at between 18.9% to 19.2% against a market low of an average 9.1%.
In terms of metropolitan areas with serviced land, Syokimau and Ruiru recorded the highest investment opportunities at 23.9% and 8.6% against a market average of 8.5%. The demand is driven by the existing growing middle income class earners, availability of infrastructure networks such as commuter train station at Syokimau and Thika Superhighway along Ruiru and relatively affordable land prices.