The real estate sector continues to grow its influence in the Kenyan economy. According to the 2023-2024 real estate survey by the Kenya National Bureau of Statistics (KNBS), the sector’s contribution to the country’s Gross Domestic Product (GDP) grew by 33.7 percent.
Property investment has always been a cornerstone for wealth creation, but it comes with its fair share of difficulties and risks.
While established cities like Nairobi and Mombasa offer a myriad of opportunities, they face congestion and, therefore, limited real estate prospects.
On the other hand, emerging towns in Kenya present a wealth of untapped potential for investors willing to be daring and take calculated risks.
Emerging towns across Kenya are experiencing rapid growth, driven by significant government initiatives aimed at decentralising economic activities.
Infrastructure projects such as the Standard Gauge Railway (SGR), the Nairobi Expressway, the Dongo Kundu bypass in Mombasa and other developments have drastically improved connectivity, unlocking the potential of previously overlooked towns and cities.
This rapid growth has not only spurred economic activity but also created unique opportunities in the real estate market. Among these, affordability is one of the most compelling reasons to invest in these emerging towns. These areas, still in the early stages of development, offer significantly lower land and property prices than major urban centres.
This lowers the cost of acquisition making it easier for both seasoned investors and first-time buyers to enter the market.
For new investors or those with limited capital, emerging towns present an opportunity to establish a foothold in the real estate sector without the financial burden associated with more established cities. As these towns grow, the potential for property value appreciation becomes an added incentive, promising long-term returns on investment.
Another compelling advantage of investing in emerging towns is the opportunity for diversification. These regions offer the opportunity to spread risks while tapping into various income streams. As an investor, you can choose to hold onto the land for future development or sell it at a higher price when its value appreciates.
You can also capitalise on the growing demand for rental properties in these towns, generating a steady income stream.
According to the 2023-2024 real estate survey by The Kenya National Bureau of Statistics, the estimated gross annual rental yield for residential properties in 2023 was Sh1.44 million per annum for a two-bedroom townhouse, Sh102,000 per annum for a studio apartment and Sh78,000 per annum for student hostels/ single rooms.
While emerging towns offer exciting opportunities, prudent investors must prioritise due diligence before committing to any property investment. Investors should evaluate factors such as infrastructure plans, proximity to amenities, potential market demand, local zoning regulations and verify land ownership and titles.
Due diligence is not just about avoiding risks but also about maximising returns by making informed investment choices. By thoroughly researching and verifying all aspects of a property, investors can benefit from the growth of emerging towns while minimising potential setbacks.
Kenya's emerging towns represent the future of real estate investment, blending affordability, diversification, and growth opportunities. As the country continues to decentralise economic activities and promote development across regions, these towns provide seasoned and first-time investors alike with a chance to thrive in Kenya’s evolving real estate landscape.
As the potential for property value appreciation and diversification grows, this favourable investment environment is further strengthened.
The progressive policies from county governments in emerging towns and cities have been instrumental in fostering a conducive environment for real estate investment.
These policies include streamlining processes for land acquisition, reducing bureaucratic hurdles that previously deterred investors, and establishing public-private partnership initiatives and tax incentives such as tax breaks to attract investors.
Such government-led efforts have not only lowered the entry barriers for investors but also signalled a long-term commitment to the economic development of these towns.
The writer is Sic Investment Co-operative Housing Unit Manager
