BY CYTONN INVESTMENT
Nyeri Town is situated in the Central Highlands of Kenya, about 150km north of Kenya’s capital city Nairobi. It lies between the eastern base of the Aberdare (Nyandarua) Range, which forms part of the eastern end of the Great Rift Valley, and the western slopes of Mount Kenya.
It is the largest town in Nyeri County and the Headquarter of Nyeri County, and former central administrative headquarters of Central Province. This therefore makes the area a strategic location to serve all the counties located in Mt. Kenya region such as Kirinyaga, Meru, Laikipia, Nyandarua, Muranga, Embu and Tharaka Nithi.
Nyeri has witnessed growth in infrastructure and amenities over the last five years attributed to:
- Devolution due to flow of money from central government to county governments most of which is invested locally,
- Tourism in the area which continues to grow,
- Infrastructure development,
- Relatively higher incomes, with it being the second richest county in terms of GDP per capita in the country at $1,503, after Kiambu at $1,785. Rounding up the top 5 richest Counties are Kajiado at $1,466, Nakuru at %1,413 and Laikipia at %1,226 on 3rd, 4th and 5th positions respectively
- Its strategic central location in the Mount Kenya Region.
- The water supply and sewerage are from Nyeri water and sewerage Company limited (NYEWASCO). The area is served by a number of main roads including: Nyeri – Nyahururu road, Nyeri-Karatina road and the Nyeri – Nanyuki road
Kenya Regional Headquarters – Nyeri is centrally located bordering over five counties in the Mt. Kenya Region such as Nyandarua, Laikipia, Meru, Embu and Murang’a. This has led to attracting Mt. Kenya Regional offices for both local and international companies such as Safaricom, Mt. Kenya regional hub, National Construction Authority (NCA) Mt. Kenya Regional Office, and Coca Cola Mt. Kenya Bottlers Ltd, hence creating demand for office space, retail and in the housing sector,
Devolution – Devolution has opened up Nyeri town, attracting government institutions, private investors and entrepreneurs to the county headquarters. This has therefore created demand for office space, retail space and residential to host all the investors and government officials,
Growth of middle-income earners –Growth of the middle-income earners has translated to increased disposable income hence creating demand in the housing sector and retail facilities, which translates to towns such as Nyeri,
Tourism – Nyeri County is on a major tourist circuit to Mt. Kenya and the northern region, hosting key tourist attractions such as the Lord and Lady Baden Powell graves, Mount Kenya and the Aberdares National Park. These therefore promotes the hospitality sector, hence creating demand for hotels, holiday homes and conference facilities, and,
Growth of SMEs – The increase in the number of SMEs due to ease in business registration that takes a maximum of 2-weeks. Mt. Kenya Region hosts many of these companies, and requires office space and housing for the employees, hence drive the demand for real estate.
However, despite all the factors supporting the real estate sector in Nyeri, there are still a number of factors, which if not properly addressed present challenges to real estate development in the county:
Availability of land – Availability of land for development in Nyeri County has been low owing to the dense population at 208/km² in comparison to Kenya’s population density at 85/km², hence resulting in relatively high land prices. The county has also been operating largely like a closed circuit with minimal land sales to non-locals. This is mainly due to ownership of ancestral land; hence, people have sentimental attachment. This operation has therefore led to slow investment growth,
Access to funds – Just like other counties in Kenya, Nyeri is facing challenges on lack of proper funding for developments due to limited access to finance, characterized by few sources of funds to both developers and homeowners, hence low housing supply and commercial properties that are capital intensive. The Banking Amendment Act 2015 and more prudent lending by banks has also resulted in a decline in credit supply in the market which will hinder Real Estate developments,
Unstructured planning regulations – Unstructured planning regulations, which currently do not clearly outline areas zoned for commercial, residential and special needs. This may lead to urban sprawl in urban centers and reduced land use maximization. The county is however working on setting up zoning regulations to formulate land use standards, zoning schemes and ordinances for all urban settlements in the county.
Inadequate infrastructure – Inadequate infrastructure such as access roads, with most being earthen roads, water services and drainage systems are poor, hence slowing the growth of real estate due to reluctant investors.
Generally, Nyeri’s residential sector is picking up, with most of the estates having existed for less than five years. This has been driven by the government decentralization, urbanization and growth of middle class in the region. The residential houses are distributed in the outskirts of the Central Business District (CBD), such as Ring Road, Kamakwa and Kingongo areas. The key estates in the area are Garden Estate, Mountain View Estate, Ring Road Estate, which comprise mainly of owner-built and occupied standalone houses.
National Housing Corporation (NHC) is the only institutional developer in Nyeri, having constructed residential bungalows available for sale to the public. Other real estate companies operating in Nyeri real estate sector are Mhasibu Housing Company Limited, Gakuyo Real Estate and Madiba Properties Limited, among others that are selling land with a gated community concept.
Research findings of NHC bungalows performance
The residential apartments in and around Nyeri town are available for rent and the market is yet to witness a build for sale model. The analysis assumes an exit price of Sh71,344 per SQM, similar to the standalone units.
The performance on the sector is as follows;