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Season of Manifestos: What’s in For the Real Estate Sector?

ON THE SPOTLIGHT

With elections just a few days away, there’s lots of excitement in the air with everyone garnering for his/her favourite candidate. Amidst the ongoing political euphoria, we need to be cognisant of the various challenges bedevilling the country thus its imperative for the public to scrutinise plans of presidential candidates. This far, only three out of the eight candidates have presented their manifestos to the public outlining what they intend to do if elected to the office. They include Ekuru Aukot of the Third way Alliance Party, Hon. Raila Odinga of the National Super Alliance (NASA) and H.E Uhuru Kenyatta of Jubilee Party. The manifesto cover range of issues from education to healthcare but we’ll limit our review to statements of intent in regards to the real estate sector.

All presidential candidates in their manifestos agree that housing remains a big challenge in the country more so in urban areas. Kenya is urbanising at a rate of 4% and it is estimated that by 2030, half of all Kenyans will be living in urban areas. This comes from the background of an increase in population growth which currently stands at 2.6% per annum according to World Bank. However, this sustained population growth rate has not been commensurate with the production of housing units thus creating undue pressure on the few available ones and results to mushrooming of slums. This has been further compounded by urbanisation that has seen increased rural – urban migration as people come looking for gainful employment. Presently, we have an outstanding demand of 1.85 million units and to meet this, 132,000 units are required per year to cater for new entrants into urban areas. So what are the plans of the various presidential candidates in regards to housing policy and real estate sector as a whole?

Ekuru Aukot, Thirdway Alliance Party

Ekuru Aukot of the Third way Alliance Party in his manifesto promises to give incentives to investors/property developers to build low-cost housing in a rent-to-own scheme. He acknowledges that there is a short supply of low-cost housing which has locked out a majority of Kenyans. In order to survive in the city, they opt to live in slums. If implemented in a structured way, Thirdway Alliance's Party will be able to make meaningful strides in resolving the housing problem. However, it largely depends on the nature of incentives being offered to investors and private developers that would make them abandon high-end developments.

They also intend to introduce a tax on idle land to discourage the speculation habit that has become of Kenyans. This, they argue will lead to optimal use of land and for the benefit of all citizens. Also of interest, is their intention to abolish Value Added Tax (VAT) and replace it with Sales Tax Capped at 3%. The VAT charged on the real estate is one of the factors that have made property quite pricey and above the reach of many. Therefore, a reduction in taxes in whatever dimension will be a great relief for players in the real estate sector.

Hon. Raila Odinga, National Super Alliance (NASA)

At the heart of Raila Odinga's transformational agenda for the real estate sector, is putting in place structures that will spur development of decent housing for all. One of the things they intend to do is establishing Urban Revitalization Board to assist in spearheading initiatives to arrest urban decay and revitalise already degraded neighbourhoods. Closely connected to the above is formulating long-term spatial development and investment plans for the major metropolitan clusters. They will also review the building code, and harmonise all physical planning and building regulations. These will go a long way in ensuring the country has a planned, structured real estate development which lacking at the moment. For developers, it will make investment planning for housing development much easier as the zones have been clearly mapped and there is no uncertainty in regards to the use of future sites.

The NASA manifesto notes that real estate in rural areas has been neglected for a long time. To turn around the trend, they intend to develop a rural housing policy and institutional framework specifically establish a department of rural housing in the national government. It will work with the county governments to provide technical services for rural housing development. To bring transformation in the rural areas as well as neglected urban centres, they intend to pursue what they call people centred infrastructure development. If elected, they will establish a National Infrastructure Fund that will be providing soft long-term finance for revenue generating infrastructure notably water, sewerage and energy. As we have argued in a previous article, infrastructure remains a critical ingredient of success in the real estate sector.

The coalition is also cognisant of the rising rent and is planning to enforce the Rent Restriction Act whose enforcement has not been satisfactory. The Rent Restriction Act is meant to protect tenants from exploitation by landlords while guaranteeing the landlord reasonable profits from his/her investment in housing. The ultimate aim of the RRT Department, therefore, is to facilitate stability of rents especially for low-income earners and ensure that capital invested in housing yields reasonable returns. They will enact Landlord and Tenant Act which will be a merger of Rent Restriction Act and Business Tribunal. This will be a win for tenants and a loss for landlords who charge unreasonably high.

Following the above elaborate policy interventions, NASA is looking at the development of affordable housing with a target of delivering 500,000 units over the next five years with a view of eradicating slums. They intend to achieve this through a public-private partnership that will see scaling up the supply of affordable housing units.

H.E Uhuru Kenyatta, Jubilee Party

The Jubilee Party under the stewardship of H.E Uhuru Kenyatta has put affordable housing as its priority when it comes to housing policy. In their manifesto, they plan to build at least 500,000 units per year and this will be achieved through working with financial institutions, private developers, manufacturers of building materials and cooperatives. The housing schemes will be well served with roads, lighting, water and sanitation and co-located with education, health and social services. The slums will be upgraded and equipped accordingly. In this regard, we'll see opening up of suburbs and peri-urban areas to host the low-cost housing units.

Further to this, Jubilee intends to establish a National Social Housing Development Fund to create alternative financing strategies to finance low-cost housing and the associated social and physical infrastructure. This will be a big boost given the fact that the commercial banks have significantly reduced lending to a majority of Kenyans due to the bank interest capping law. This, to some extent, will be a gesture of confidence to private developers to embark on the development of low-cost housing since the government will avail the finances.

Also, if reelected, they will digitise all land registries across the country to facilitate easier and cheaper land transactions. Services at various land offices have been a big challenge for many players in the real estate and digitisation of land offices will go a long way in resolving most of the teething challenges.

They also intend to carry out annual building audits with an initial target of 6000 buildings per year to ensure safety and security of tenants. The statement of intent comes on the background of increasing number of collapsing buildings which has been blamed on poor workmanship. This, in the end, will ensure that the country will have quality habitats. The developers will have thus work hard to ensure that buildings they develop meet the minimum standards set.

A review of the plans for each candidate shows that the issue of affordable housing will be the centre stage for the next government when it comes to housing policy. If followed through to implementation, the policies will truly transform Kenya's real estate sector.

AUTHOR´S NOTE:

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