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High construction costs push developers into new house designs

Photo Caption: Alice Mukami, a Nairobi-based Real estate developer and a consultant.

A growing number of Kenyan developers are fast adopting new house designs owing to the increasing associated costs of putting up a structure.

High costs of raw materials for building, toxic taxation regime and labor charges are to blame for the new shift according to most experts who spoke to Business Hub who now believe that the new structural home designs with flat roofs will sustain in the years ahead.

“The new design is inspired by two factors, one the high costs of construction and two the creative nature and desire of this generation to live in a better place which give them the flexibility they need to personalize the house the way they want,” says George Mburu, the Chief executive of Mizizi Homes, a local real estate developer.

It is estimated that the average cost of construction in Kenya ranges from Sh 33,450 per square metre for a standard private house in Nairobi, to about Sh 72,400 per square metre for a luxurious high-rise office block in the Coast region of the country.

The costs according to the president of Institute Of Quantity Surveyors Of Kenya Chris Munene are factored in contract bill contingency amounts and construction labor, including professionals who are typically engaged in Kenya such as architects, engineers, quantity surveyors, clerks of works, project managers.

“These professionals any developer has to hire if you are to have a complete structure void of unprofessionalism…put these together with other costs of raw materials and you will see why the costs are higher,” says Munene.

Analysis carried out in 2013 by the African Development Bank (AfDB) showed that typical costs for a single housing unit – whether a standalone or part of a high-rise – broke down to 60 per cent for construction split 70-30 between materials while labor 10 per cent each for infrastructure, land and professional fees for architects, engineers, permits and the like), and 5 per cent each for financing and contingencies.

Indeed, such costs have risen in recent years. It is believed that those costs have more than tripled 8 years later and is to blame for the new shift in the sector with the high proportions of building costs that go to materials presenting a challenge for private firms to provide cost-effective housing.

The latest numbers from the National Association of Home Builders shows that since mid-April of 2020, lumber prices have risen by 130 per cent, and those increased costs have increased the cost of single-family homes more than $16,000 on average.

“Things have changed so fast in the last few years and what makes a flat roof very affordable for both installation and upkeep and maintenance as opposed to using iron sheets. Labor is cheaper due to less risk while installing a flat roof,” says Alice Mukami, an independent real estate consultant, who says the trend is appealing to young homeowners.

Installation of flat roofs are also thought to be quicker and easier with fewer damage and repair costs over the lifespan of the roof. “Installing things like solar panels, which save on electricity, and satellites—making repairs and cleaning gutters less expensive and easier to accomplish on flat roofs,” she says.

The cost of iron sheet has been on a steady rise since 2013 when iron sheet box profile gauge 30 per 2.5 meters was retailing at an average price of Sh750 which is now retailing at Sh1, 115.00 per 2.5 meter today which is being attributed to higher taxes imposed on such materials.

Also thought to hurt the sector is the higher taxation in the last two years.

The Kenya Revenue Authority (KRA) reverted the rate of Value Added Tax to 16 percent in January this year and the rate of Minimum Tax of 1 per cent of the gross turnover effective among other noxious taxes.

Kenya’s real estate sector is projected to record a sluggish growth according to a 2021 Real Estate Market Outlook by Cytonn Real Estate, the development affiliate of Cytonn Investments, which believes that the tough economic environment brought by the global pandemic will be critical for the sector’s survival.

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