Feature: Kenya's rural towns becoming new frontier for real estate developers

Source: Xinhua| 2017-07-07 18:47:34|Editor: Zhou Xin
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By Bedah Mengo and Wang Xiaopeng

NAIROBI, July 7 (Xinhua) -- On one side of the rural town named Majengo in Vihiga, Western Kenya, stands a two-story building that is nearing completion. Few metres away from the house is another three-story one, which is hosting several small businesses, including mobile money agency shops.

Away from the two commercial buildings, several others, including residential ones, stand in the small trading center, a sign of real estate boom that is happening in many rural towns across the East African nation.

Buildings are sprouting up in the once sleepy towns as demand for houses and business premises rises, with the centers seemingly choking with real estate development.

The rural towns have become the new frontier for real estate developers seeking to invest away from the capital Nairobi, where many high-rise buildings are under construction and house prices have risen sharply over the past few years.

In addition to increased demand for houses and business premises, rising rent due to fast economic growth is luring investors to the trading centers in towns.

Other factors attracting real estate developers include improved infrastructure with nearly all trading centers across the country having their roads upgraded and getting electricity supply.

"I was born in this town and have lived here ever since but I had never seen so much construction as it is happening now. New buildings are coming up nearly every month changing this small town rapidly," said Benson Chavune, a resident of Majengo.

Chavune, who runs a meat shop at the center noted that the owner of the building hosting his shop has given them notice to vacate.

"He sold the property and the new owner wants to demolish these shops so that he can build a three storey modern one," he said, noting the era of cheaper business premises that go for about 50 dollars a month is slowly fading in the town.

Monthly rent in the town, as many others across the country, has been on the rise with a single-room shop going for up to 150 U.S. dollars, from nearly half the amount some two years ago.

On the other hand, residential houses are going for between 120 dollars and 150 dollars for a two-bedroom house per month with a one-bedroom house being rented out for 100 dollars.

Initially, most of the houses being built in rural Kenya for renting were bungalows but recently apartments and maisonettes are taking the pride of place.

"Developers want to cash in on the real estate boom amid declining land sizes whose prices are on the rise, with a quarter acre going for up to about 29,126 dollars. You can not build bungalows and reap quarter and eighth acres plots. One must utilize the space above, which is what the developers are doing," said Antony Kuyo, a real estate consultant with Avent Properties in Nairobi.

He noted that just as in Nairobi, apartments are becoming popular in rural areas because of rising returns, which stood at 12 percent in 2016 comprising rent and capital growth as compared to other houses.

As those in urban areas, developers in the rural towns are also paying extra attention to quality and presenting buyers with trendy houses that are luring more people.

But it is not only small business premises and residential areas being constructed, property developers have detected the potential of rural areas, with some going for huge real estate projects similar to those in Nairobi.

One such a project is in Butere, Kakamega County in western Kenya, where a developer is putting up a 2 billion dollar city.

The city contains a shopping complex with 1,500 rooms, a 36-hole golf resort and a residential area with 4,800 houses.

"We will also have a mall that will have a supermarket, several shops and a medical complex that will host dozens of healthcare experts," said Julius Mwale, the U.S. based investor, adding that once completed, the development will be a first in the region and in rural Kenya.

According to Cytonn, a Nairobi-based investment firm, real estate sector across Kenya continues to grow across the country supported by high annual returns that stands at above 20 percent, high demographic, rapid urbanization at 4.3 percent annually, an expanding middle-class and improved infrastructure.

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