Impact of Devolution on Kenya’s Real Estate Industry

Devolution in Kenya has been lauded as one of the greatest governance and resource allocation intervention that has been operationalized since the country’s independence. Previously before the advent of devolution, there were regions in this country that didn’t have even a single meter of tarmac road. However, the dispensation of the 2010 constitution is changing fortunes, from Nairobi City County to archipelago islands of Lamu County down at the coast.

While the County government face teething challenges, the fruits of devolutions are bare for all to see. Devolved governance has impacted many industries by opening up opportunities that remained dormant and untapped. Real estate sector is perhaps of the greatest beneficiary of the devolved system of government.

Devolution has created new urban centres with reasonable economic activities as the resources dispersed by the national government trickle-down to the grassroots. Commerce and trade have improved immensely with people moving from rural areas both within the county as well as other counties to look for better economic opportunities. These new urban centres are releasing pressure from the other cities and towns that were beginning to experience population explosion due to incessant migration; both rural-urban and urban-urban migration.

With the establishment of County headquarters and the resulting population, real estate developers are moving in to provide accommodation for the county staff as well as employees of private organizations operating in the county. Putting up new cities is a huge feat but it’s something that can be achieved in the long term provided there is a robust urban master plan. Laikipia County, for example, is working on moving the County headquarters from Nanyuki to Rumuruti. Nanyuki town is far much developed as compared to Rumuruti town and thus elevation of Rumuruti as the county headquarters will unlock opportunities that weren’t previously available to the local population.

Indeed, the prospects courtesy of devolution are vast. In this respect, real estate developers and County governments should endeavour to pursue public-private partnerships to accelerate growth in the County headquarters. However, in the interim county governments should focus on putting in place a responsive infrastructure; roads, light rail, street lighting, airstrips, water and power among others. These are the ideal pre-requisites for a real estate project to be successful. Additionally, the county governments should also look into streamlining regulations and laws to improve ease of doing business in their county jurisdictions. Overlapping levies and taxes have been a major headache for most enterprises as they increase the cost of doing business. In this regard, counties that will be deemed to have a conducive business environment are more likely to attract lucrative investments, both local and foreign.

The property developers on their part should map out opportunities in counties that they believe that they will be able to make the greatest impact; in terms of their business bottom-line and value for the locals. To achieve this, developers should come up with localized real estate solutions due to the differing economic dynamics across the counties. For example, Kilifi County is more primed for holiday homes/resorts as compared to Nairobi City County that is ideal for affordable residential housing.

A quick review indicates that the majority of the counties are yet to realize their full potential as real estate has mostly been concentrated in Nairobi and Mombasa. Already, counties like Kisumu are quickly gaining momentum as real estate activities have heightened in the past five years. Further afield, there are plans to increase the share of the devolved funds and this will significantly increase the impact on the ground as more money will be available for development. However, as much as there is a clamour for a higher share of revenue allocations, the devolved units should use the resource prudently to accelerate development agenda at the grassroots level. There is no doubt that the devolution continues to hold great promise Kenya.

The views expressed here are of the author and do not necessarily represent the position of Square Foot Real Estate Ventures Limited and as such does not warranty any particulars.

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