3 August 2011

Kenya: Large Institutions Can Erode Residential Property Values


With the current high demand for land in urban areas to build either for commercial or residential use, the scarcity of vacant parcels has resulted in rising prices for available space.

Accordingly, more organizations and institutions have been pushed to convert homes into offices whereas some look to buying and re-developing space where conditions allow. Quite often, institutions are opting to lease built up space especially within or near residential zones.

However, this trend is setting them against existing land-use regulations which restrict on the type, location and size of building among other things that can be put up in these zoned areas.

For example, it's illegal to have a factory or industry within or very close to a building where people live in. That is why we have 'industrial areas' set aside.

Similarly, large institutions, say educational facilities such as schools and colleges, cannot be allowed to transform residential plots for this purpose unless the location was designated from the beginning for such facilities. This is because of the likely impact on existing residential areas.

This may be one of the reasons why for instance residents of Nakuru's posh estate Milimani moved to court when a higher learning institution leased space here for a campus.

We should understand that one of the main reasons why people leave crowded estates and move to posh areas is for privacy and the serenity.

The so-called leafy suburbs have less activity besides the residents coming and going from their homes since most are owner-occupiers.

Mostly there isn't public transport or many people walking around in the estates, making them comparatively quiet and private. There are some notable effects of learning institutions in residential areas.

First, there is decrease in residents' privacy:

students will walk around in the estates admiring the beautiful houses, and different kinds of transportation for the students.

Second, fear of insecurity will emerge:

small businesses such as kiosks are likely to mushroom to quench consumer needs of students.

Third, property values are likely to nosedive:

As the estate loses its fundamentals, property for sale and letting start depreciating in value, with a likelihood of a high of tenancy turn over.

Fourth, morals are likely to be affected negatively:

For instance, emergent issues such as prostitution are likely to be evident as demographics keep changing rapidly.

In summary, learning institutions moving into areas primarily residential weighs down the property values and may erode capital gains.

Juma is a property manager at Jojean Properties Limited, Nakuru.

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