Landlords Staring at Financial Losses As Housing Glut Hits Nairobi Satellite Towns


Property developers in the satellite towns of Nairobi are finding it increasingly difficult to attract tenants as the areas...Property developers in the satellite towns of Nairobi are finding it increasingly difficult to attract tenants as the areas experience a glut of rental units.With the capital city experiencing pressure on housing due to rural-urban migration, a percentage of its residents have over the years opted to construct their own homes on the outskirts of the city.

For this reason, towns like Kitengela, Kajiado, Ruai, Kikuyu, Kiserian, Kamulu, Athi River and Mlolongo have emerged as some of the areas preferred by those wishing to own their own houses fuelled by the availability of affordable land.

Real estate developers have also joined the exodus and are making speculative investments in hopes of easy profits. In the process, residential flats and houses for rent are mushrooming in areas traditionally perceived of as the preserve of home owners. But most of these rental units remain vacant for long periods despite the low rents as prospective tenants still prefer to live closer to the Central Business District.

Worst affected are those who have put up rental flats as tenants seeking to live in flats opt to rent them within the boundaries of the city. In Kitengela for example, the Sunday Nation found that a two-bedroom apartment currently goes for Sh15,000 per month. In Rongai the same unit rents for Sh12,000 and further away in Kiserian for Sh9,000.

Across town, rent for similar units in Ruai, Kamulu and Athi River are even lowers at about Sh8,000 and Sh7,000. This cost is dependent on several factors like proximity to a road and property agents. But developers said the units are increasingly taking longer to get rent, and this is putting them at loggerheads with financiers.

“Houses here are taking up to over a year to fill up when we expect them to take only three months at most,” says Mr Dennis Maina, a developer in Ruai. “Even then, you can’t say there is an apartment block that is fully occupied at any given time. Normal occupancy level is about 60-70 per cent,” he said. In Kitengela, Mr John Makori, who put up an apartment building two years ago, says he is having a difficult time repaying the loan he took out for the construction of the property as it is still yet to achieve 100 per cent occupancy.

“We have slashed the rent downwards from Sh25,000 to Sh15,000, but tenants are still not coming, and some of those already in are having difficulties in paying up because most of them are local businesspeople. Very few are employed in the city,” he said. His apartment bloc of 16 two-bedroom units was supposed to give him Sh400,000 a month according to his initial plan, but he says making three quarters of that is difficult.

“I took a loan of Sh12 million to construct the building and I have fallen behind three months in repayment. The bank is pressuring me, and if this continues they may repossess the house,” he says.


For this reason, developers in these areas are being forced to dig deeper into their pockets to upgrade their rental units in order to attract the few tenants seeking to live there. This includes fixing hot water showers, installing wi-fi, CCTV surveillance, cable TV and drilling boreholes.

“We are competing for very few customers because tenants have so many options, and the only way to attract them now is to improve the appearance of your house and increase amenities and hope they will come. This means spending more money which we don’t have in the first place,” Mr Makori said.

But across town in Kikuyu, Kinoo and Muthiga, also satellite towns, the situation is exactly the opposite and occupancy levels are almost at 100 per cent. In fact, more apartments are being built. Kikuyu and Rongai are all about 20 kilometres from the Central Business District.

Many occupants
Property developers in Kikuyu say the high occupancy levels of housing units in the area is because of the availability of fresh water, the smooth flow of traffic, accessibility to fresh food and the high attitude and green environment that the satellite towns on the lower side of Nairobi do not have.

“Even though these areas are similar distances from town with Kikuyu, they are primarily served by Mombasa Road whose traffic is constantly in a mess, meaning you pay less rent but spend more on fare,” said Mr Joseph Gichanga, a realtor for  Peta Agencies in Kinoo.

“Furthermore, most of the houses in those areas have bore hole water for the tenants which is salty, and no one wants to drink salty water,” he says. But experts say the disruption of land consolidation through get-rich-quick attitudes is the reason for the doldrums in the property market in these areas and it could get worse as developers continue to put up more units.

According to Johnstone Nderi, the corporate finance and advisory manager for ABC Capital, developers ought to look at other factors like road network, accessibility to government services, schools, hospitals and security – which are not in good supply in the satellite towns – before investing in real estate.