MIP WEEKLY CONSTRUCTION INDUSTRY REPORT NO. 22

PERIOD: January 18 to 24, 2016

Crown paints is set to open a Ksh 400m factory in Kisumu. This is expected to help the firm cut costs as it seeks to cash in on the growing real estate market in the western region.
The paint maker is putting the final touches on the construction of the facility, which should open in the coming weeks.
The new plant will supply all the western counties in the western region, including Kisumu, Eldoret, Uasin Gishu, Kakamega and Bungoma.
It has the capacity to manufacture 1.3 million litres of paint a month. Currently, crown produces 2.3 million litres a month.

The construction of office blocks and commercial space in Nairobi is falling, even as residential property developments continue to grow.
The county government’s statistics show that the value of approvals for residential property increased by 14.11% to Ksh 103.83bn in the nine month period to September, up from Ksh 90.99 billion last year.
However there was a 4.15% drop in the value plans of development of non-residential blocks, main offices, shopping malls and warehouses. Their value dropped from Ksh 67.74b to Ksh 64.93b last year.

Big developers are still grappling with high environmental audit fees despite President Uhuru Kenyatta’s directive to introduce a cap a year ago.
The audits , or environmental impact assessment (EIA), are applicable to projects valued at more than Ksh 10 Million and are managed by the National Management Authority(NEMA)
The EIA fee structure was reviewed in 2013 to a minimum of Ksh 10,000 or 0.1% of the project cost, but without an upper limit, making it costlier for developers of big developers.
Previously, the fee structure had a maximum of Ksh 1,000,000.

Developers say that the available data is skewed and unreliable, making it hard to tell the emerging opportunities in the industry.
They claim that the country lacks proper data on the specific housing categories, despite the dire need of units in major urban areas.
A case in point is the 1999 census, which calculated the number of households based on the main source of water. This can be very erroneous, given that in places like Nairobi, where the surface water is sometimes polluted by main sewers, industrial and solid waste, the number of households shown to be relying on water from ponds, lake and streams was unrealistic.
This problem links to poor and few investments that have been made in the housing sector, saying that most investors would shy away from the industry because of lack of adequate data.
Investors who would otherwise be able to finance the development of houses shy away from the industry. As a result , property developers have to look for the relevant information at their cost, unlike in other sectors.

According to Cytonn investments business and market outlook report, Nairobi’s Westlands is the best bet for real estate investors in the residential sector with a three bedroom raking in Ksh 150,000 monthly.
This places Westlands above nine other residential zones in the city. It is followed by kilimani, Ruaka, Lavington and Ongata Rongai.

According to Deloitte’s Africa Construction trends Report 2015, expansion of cities and burgeoning middle class are the driving economies of East African countries
In the case of Kenya, the last few years have seen global hotel franchises like Best Western, Villa Rosa Kempinski and Radisson Blu set up shop in Nairobi, with mega projects like English Point Marina, Tilisi in Limuru and Garden city mall open.
According to the report, the region is the fastest growing on the continent with economic growth expected to expand by over 5%, higher than the continent average of 4.5%.

Nairobi City County has identified 50,000 buildings that risk being demolished as a result of lack of construction approvals. They have given the developers a one-month notice to comply or face demolition. Many of the buildings that are constructed in Nairobi are not planned for, or regulated by City Hall as they do not have construction or building permits.
It has been noted, Non-compliance is caused by several factors, including;
- High levies charged by City Hall such as the EIA levy which has a floor of 0.1% of project cost and no ceiling as well as the construction cost permit which is 0.5% of project cost,
- Time taken to get the approvals also discourages developers from applying for the permits as it can take more than a month to get a building plan approval,
- Bureaucracy involved in the process discourages developers from applying for the permits.
- Requirement to own a title deed in order to apply for and receive building permits while most people have certificates of ownership or share certificates from companies, and
- City Hall and the other bodies in charge of regulation such as NEMA have also not been stringent in the enforcement of these regulations.