Urbanis Africa, a consortium of Kenyan and Swedish real estate investors, is planning to construct a Sh6 billion housing project in Athi River expected to accommodate 7,000 people.
Transaction advisors for the project, AIB, said the estate will be financed through a mix of debt and equity.
Paul Mwai, the chief executive of AIB said Sh1.6 billion will be sourced from banks, Urbanis shareholders will contribute Sh90 million while Sh3.8 billion will be raised from the sale of completed house units.
“When people buy the houses you get the money and move to the next phase,” said Mr Mwai. The estate, with 2,500 units, will sit on 237 acres of land.
Mr Mwai described Urbanis as a “consortium of Kenyan and Swedish investors.” A school, shopping mall and an office park are to be included in the project, which is scheduled to begin by the end of the year.
The estate to be known as Kenani is targeting the mid and the low end of the middle class segment.
The starting price for the houses is in the Sh1.5 million range and is capped to Sh7 million.
Serving this market is Urbanis’ forte having previously worked with Jamii Bora Makao, the real estate of micro financier Jamii Bora, which targets the low end of the market.
Property developers said that houses at this price ranges are not readily available in the market despite the huge demand which if unlocked can offer massive gains for investors.
Mr Moses Wekesa, the chief executive of Grade East Africa, a property development firm, said that the low end of the market offers the biggest potential but is least exploited especially by mortgage firms.
“This is the biggest frontier for development that has not yet been cracked,” said Mr Wekesa.
The main problem in this market, he said, has been availability pairing with affordability, and land prices appreciating in inhibited strides makes the situation worse.
The direction of interest rates has also not acted in favour of the mortgage sector which has a 16,000 housing unit stock.
This follows Central Bank of Kenya increasing interest rates to 18 per cent from six per cent as a means of taming inflation in the last quarter of 2011.
There is a backlog of three million units specifically for the middle and lower income segment since the market can only churn out 30,000 to 40,000 units, yet demand is at 240,000 units said Mr Wekesa.
The developers of Kenani Estate have a goal to construct a large housing estate that is reminiscent of the Nairobi of the 70s.
“What I can describe it is another Buru Buru,” said Africa Investment Bank. Lower middle income earners will have 1,200 units priced at between Sh1.5 million and Sh2.5 million while the mid-middle income segment will have 1,000 units priced at between Sh3 million and Sh7 million.