The Real Estate Market and its Impact on Slums
By Nyasani Mbaka
Kenya’s mortgage market has more than quadrupled in the last 5 years with its value growing from Kshs. 19 billion in 2006 to just slightly over Kshs. 81 Billion by June 2010 (CBK, 2010). The mortgage debt to GDP ratio is just under 2.5 per cent, better than Tanzania (0.2%) and Uganda (1.0%) but not comparable to South Africa’s (32.5%) or other developing countries such as India (6%) and Columbia (7%). The net lending to the private sector for real estate development outpaced credit to businesses and households in 2010, representing over 33 per cent of the total lending rate by the formal banking sector.
The rising activity in the real estate market made the construction and real estate sector the best performing sector in Q2 of 2010 with an 18 per cent growth rate and contributed 11 per cent of the GDP. With an estimated backlog of 2 million units and an annual supply deficit of over 120,000 units, demand for housing units far outweighs the supply.
Nairobi alone represents over 60 per cent of the real estate activity in the country and continues to grow at a rate four times that of the rest of the country (CBK, 2010). Despite this phenomenal growth in investment in the real estate and construction sector, less than 2 per cent of the funds have financed housing for the urban poor.
Impact on Slums
There is a crisis looming in the horizon for informal settlements in Nairobi as banks, financial institutions, private investors and real estate developers continue to invest heavily in Nairobi’s vibrant housing market. Every inch of urban space is now a gold mine for developers, a situation that will lead to a phenomenal increase in ARSON, DEMOLITIONS and ORCHESTRATED VIOLENTEVICTIONS.
The contiguous belt of Mukuru slum settlements is especially vulnerable as it sits on approximately 2,000 acres of prime private land, close to the industrial area, the Jomo Kenyatta International Airport, the main arterial road from Mombasa to Nairobi, the eastern bypass, the commuter rail line and other high value amenities.
This land has a population of over 500,000 people most of whom provide labor to the Nairobi’s industrial area. The families that reside on these lands are mostly squatters with no security of tenure and consequently face the daily threat of forced eviction.
Did You Know?
That In 2004, slum residents in Nairobi alone paid at least US$31 million (Ksh 2.3 billion) in rents. This figure is estimated using an average rent of Ksh 790 per month per household, a tenancy rate of 92%, and a slum population of 0.81 million in the capital city. This figure exceeds, Nairobi city’s annual budget for investment as well as operations and maintenance.