16 August 2018

Kenya: Questions Linger Over Sonko's Multi-Billion Low Cost Housing Project

Exactly how many houses are being built under the Nairobi Estate regeneration project? And do all the companies that have signed up contracts to erect high rise buildings in some of the city's oldest estates have the capacity to handle the job?

These are just two of the questions being raised after the county government said it had reached agreement with eight companies for the construction of low cost houses in seven city estates.

The selected firms -- Edermann, Lordship Africa, Stanlib, KCB, Kiewa Group, Directline Assurance, Jabavu Village Limited and Technofin -- were picked following requests for proposals that were floated in April.

They will handle Ngong Road estate Phase I, Ngong Road Phase II, Uhuru Estate, New Ngara, Old Ngara, Suna Road, Jeevanjee and Pangani, respectively.

LEGAL WRANGLES

Already legal wrangles threaten to delay one of the projects; Ngong Road Estate with Edermann and Lordship Africa contesting to build the entire estate.

"Ngong road has a dispute with a court case. There are two companies wrangling here as one was given phase I and the other phase 2," Nairobi County's Housing and Urban Renewal Executive Richard Kerich told Nation.

Questions also linger on the number of units expected to be developed. While bid documents on the county website state 25,000 modern and affordable housing units for the technical criteria another document calling for financial experts specifies '14,000 modern and affordable housing units, market stalls, commercial and retail space spread across seven sites.'

Controversy has also stalked some of the companies selected. Edermann, which has developed the Greatwall Apartments along Mombasa Road and the Lake Basin Mall in Kisumu are involved in a dispute with London Distillers Kenya over pollution of its estate in Athi River.

ROUGH RIDE

But it is the capacity of Direct Line Assurance to see through the project that will be keenly watched. The firm founded by the late John Macharia, the son of Royal Media Group owner SK, has had a rough ride in its dealings with insurance for Public Service Vehicles.

In the year 2015/6 the company suffered an underwriting loss of Sh293 million. Like other players in the sector the company blames this and its ability to pay claims on fraud.

Lordship Africa, a firm with roots in Central Europe, is behind the Karen Hills project, a gated community with 60 fully-serviced one-acre plots.

Stanlib, Kenya's first listed real estate investment trust will be having its first significant foray into the property market with the regeneration project.

Kenya Commercial Bank, through savings and loan, could be the most experienced of the firms picked.

Kiewa Group is leading a consortium in redeveloping the old Ngara project at an estimated $70 million (Sh7 billion), according to a brief seen by Nation.

Jabavu Village Limited, which is developing the Hilton Nairobi Upperhill set to open in 2020, has already seen its contract for the Jeevanjee/Bachelors quarters project being contested by residents for lack of public participation.

RECOUP INVESTMENT

The county government says it will not be paying the developers for construction. It will only provide land and then the firms will own 30 per cent of the property they construct so that they can recoup their investment and make a profit from it.

Mr Kerich said on Tuesday that the other 70 per cent must be low-cost housing, and the developers are under instructions build structures whose value ranges between Sh1 million and Sh3 million. Some of the developers had indicated prices as high as Sh6 million.

"We are renegotiating some of the contract because the houses are so expensive. We want their prices reduced to what an ordinary Nairobian can afford over a long period of time," said Mr Kerich.

Pangani Estate will be the first to break ground in September.

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