The Kenya Railways Corporation (KR) is seeking a larger share of Kenya’s real estate market with plans to build shopping malls, hotels and office blocks in Nairobi and Kisumu.
The company has now invited consultants to map out how development on its Syokimau (13 acres) and Kisumu (16 acres) sites will look like. Work on the projects will begin next year.
The rail company has more than 350 acres of idle land surrounding its railway stations and has been scouting for investors to develop it with leasing out the land being its preferred investment route.
“We intend to construct facilities that are going to complement the railway line once it is fully operational,” said Nduva Muli, the firm’s chief executive officer.
The Sh16 billion railway project is envisioned to link all the key sections of the city through a railway network that converges in Nairobi’s central business district (CBD).
This is expected to attract investments with the rail firm keen on benefiting from the expected higher human activity along the railway routes.
The parastatal’s real estate projects come at a time when a property boom in the country has caused home and office block prices to rise 3.5 times in the past decade — a return that has caught the attention of both local and foreign investors. Rapid urbanisation, population growth and expansion of the middle class have emerged as drivers of Kenya’s property market, which is riding on nearly three decades of under-investment.
Tracts of idle land
The large tracts of idle land and the need to grow its profits has made the parastatal to increasingly become keen on diversifying its ventures away from railway – a core business that has not enjoyed much success to date.
KR has in the past signed joint venture partnerships where other than providing the land for development, it also offers part financing for some of its infrastructure projects.
One such partnership is The Smart Cities, also expected to begin next year, in which the rail company intends to build residential accommodation, hotels, light industries, shopping malls and recreation facilities in Mombasa, Kisumu and Nairobi. About 385 acres of land are needed for this project that will see investors foot up to 85 per cent of the capital required.
In June last year, Kenya Railways signed an agreement with the National Housing Corporation that required the rail firm to open its land for construction of homes in towns.
The deal was to see a prime land owned by the rail firm in the upmarket Kileleshwa suburb be used to construct apartments which are to be sold at Sh8 million each compared to market rates of over Sh10 million.
KR however says that it is waiting for a feasibility study to be completed before choosing which route to pursue in its latest project.
“Once the master planning and feasibility studies are complete and the cost of the entire project is determined, we shall decide on the appropriate funding option to adopt,” said Mr Muli.