What Nairobi house prices tell us about the highs and lows of Kenya's middle class boom

On the outskirts of Nairobi, vast tracts of agricultural land are seeing a new type of growth, as steel rods and concrete pillars set into the red earth reach into the Kenyan sky.

More than 17,000 acres (6,900 hectares) of farmland that was home to coffee bushes and cattle is being turned into satellite cities as developers eye the nation’s growing middle-class.

Nairobi, Kenya’s capital, is home to about 4 million people, but - said urban development agency UN-Habitat - decades of unplanned growth amid rapid urbanization mean more than half of its residents live in slums.

Satellite cities Tilisi, Tatu City and Northlands City offer an alternative, say developers, and will provide homes, offices, schools and recreational facilities for half a million people.

“People are desperate to come into a city where they are not going to worry about power outages or water shortages or traffic congestion,” said Ranee Nanji, co-chief executive officer at Tilisi Developments, which manages the 400-acre Tilisi site.

“That is why plans like ours work,” she said.

But satellite cities are not without controversy. Urban planners like Constant Cap, who lives in Nairobi, warn they could increase inequality.

“These (new) developments rarely explain how they will deal with challenges like low-cost housing,” Cap told the Thomson Reuters Foundation.

“They run the risk of creating further divisions between the rich and the poor, which will be visible by the proliferation of informal settlements at the edges of these cities.”

Incentives

Kenya has one of Africa’s fastest-growing middle-classes, according to services firm Deloitte, and has seen greater investment in real estate as private developers capitalize on high housing demand.

According to property agency Knight Frank, Kenya has Africa’s fourth-highest number of wealthy individuals, and is one of the continent’s leading destinations for real estate investments by its super-rich.

Nairobi is also one of Africa’s most expensive cities for housing, the World Bank has said, with prices in 2013 nearly three times those of 2000.

Tilisi, which lies 30 kilometers (19 miles) west of Nairobi, is the smallest of the four planned satellite cities.

Like the others, which include the government-led Konza Technopolis, it will have residential and commercial areas, with schools and shopping centers promising residents “an all-round lifestyle experience”, Nanji said.

Other African countries are following the same path, with more than a dozen satellite cities being developed, said Alfred Omenya, an architect and principal researcher at Eco-Build Africa, a sustainable urban-planning and housing organization.

They include Rwanda’s Vision City, Waterfall City in South Africa, Roma Park in Zambia and Appolonia in Ghana.

Their focus on housing the middle- and upper-class is one bone of contention, as is the domination of foreign developers, who he said enjoy unfair government incentives like tax breaks, said Omenya.

“This can only deepen class exclusion, segregation and conflicts,” said Omenya.

“These new cities are also drawing resources like taxes from existing ones as authorities try to lure foreign real estate investors.”

Added to that, he said, the country for years neglected building the two million affordable homes its cities need in order to meet its housing deficit and stem the growth of slums.

Last year, the government embarked on a housing program under its Big Four development plan aiming to entice private investors to build half a million low-cost homes by 2022.

Charles Hinga, Kenya’s principal secretary for housing, estimates this will cost about $13 billion.

“We will be financing this through private capital,” he told the Thomson Reuters Foundation, adding that the government would provide incentives such as free land and tax breaks for developers and buyers.

Nick Langford, who heads the country office for Tatu City developer Rendeavour, said private satellite cities could only provide affordable housing if they received subsidies for aspects such as infrastructure, as well as tax holidays and special economic zones.

“There is no magic wand to providing housing to the urban poor who can’t afford it,” Langford said on the sidelines of a home-buyer’s site tour at Tatu City, 22km north of Nairobi.

“We would love to develop housing for lower price points, but we can’t without subsidies.”

Social fabric

At Tatu City, high-rise flats are already located where coffee bushes once stood as agriculture gives way to a concrete jungle that will house 150,000 people.

Where there were coffee-pickers there are now construction workers in multi-colored jackets and yellow helmets, while hoes have been replaced by shovels.

Cap said development of satellite cities encroachment was also taking away good agricultural land and depriving Nairobi of its source of cheap, affordable food.

Regardless of their size, he said, new cities should be planned to reduce their impact on the environment and those living in the area - where most of its workforce will come from.

“Private cities risk becoming islands of wealth in a sea of slums if not planned well,” Cap said.

Developers Nanji and Langford insisted their projects would not harm the social fabric of local communities. And, they said, Nairobi could source its food from other areas.

Nanji said Nairobi’s high rate of urbanization meant that the farmland on its outskirts would sooner or later have been developed in an unplanned manner - which would be worse than having organized satellite cities.

“The urbanization rate is so high that this agricultural land would eventually be taken over by unplanned real estate,” she said.

“We need to have a healthy mix of things that are agricultural and places to live.”