Nairobi's middle class drives construction surge, with mixed reviews

This post is part of the Daily Dispatches project chronicling life in Nairobi, Kenya throughout the month of April.

Mike Pflanz offers a personal view on Nairobi’s construction boom, and what it could mean for the city’s future.

The face of this young city is undergoing radical plastic surgery. In what the media here never fail to call “the leafy suburbs,” 1930s stone-built bungalows behind manicured hedges are being torn down and multistory apartment blocks rising high in their place.

Out on the upgraded highways snaking into the city, red tiled roofs stretch across acres of what was once empty grassland tended only by Masai cattle.

Malls are morphing from charming clusters of family owned grocers and butchers, where everyone knows your name, into many outlet monoliths to Mammon.

At well-to-do dinner parties, this is a constant topic of slightly disapproving conversation. Think of all the traffic. Have they upgraded the sewer pipes and the water supply? How will the electricity grid cope with all this extra demand?

For Nairobi’s mushrooming middle class, however, that’s beside the point. They have money (credit?) to spend, and developers are answering their call. In one five mile stretch leading from the city’s west towards its center, there are now seven major shopping centers. Branch a mile off that road, there’re three more.

Two malls are brand new. Others are undergoing significant upgrading, more than doubling their outlets, bringing in casinos, smart new restaurants and cafes, high-end shops.

It’s not just the shopping. Demand for decent housing for the increasing numbers of salaried staff, the people jamming the malls each weekend, has far outstripped supply.

So, in fact, has demand for all housing that isn’t illegal, walled and roofed in tin, and far from water and electricity grids.

To house the huge surge in the city’s population, 150,000 new units must be added to the housing stock each year. Currently, the number’s closer to 12,000 – a deficit of almost 380 sorely needed homes a day that are not being built.

The problem is, according to architects and urban planners I have spoken to, most of these 12,000 new properties are aimed at those at the top point of the pyramid of the city’s wealthy few.

The numbers back that up. The country’s average wage (for the minority who earn a wage) is somewhere around $4,500 a year. But the average mortgage was more than 12 times that, at $56,000. That’s the highest ratio in Africa.

With high interest, very few can afford that. An architect I was chatting to yesterday told a story of a friend’s young cousins, both recently hired by Microsoft here, for whom it would be years before they could buy one of these swanky new apartments, in compounds with swimming pools and gyms.

Many others will try, however, raising fears of a microcopy of the boom and bust in the US which led to the financial crisis.

And even behind the numbers, there are other worrying pitfalls. Nairobi currently has no urban plan.

There was one, once. There have been two, in fact, in 1948 and in 1973, either side of Independence from Britain in 1963. The latest expired in 2000. Both are widely criticized for ghettoizing people according to their income (or, in the earlier British version, their skin color).

The fact that there’s no central plan in place to manage the city’s current headlong construction rush means that there’s little regulation, little attention to aesthetics, and no demand to include open space around new developments.

There’s also no real building code to which technicians can refer to ensure new homes meet standards.

There are, simply, no enforced standards. Developers reading this will complain that that’s an exaggeration. I don’t know, guys, it was the director of planning at Nairobi City Council, Patrick Odongo, who told me that.

Then there’s the stuff that makes a city function. Take the water supply. Some 40 percent of the 450,000 cubic meters supplied to the city each day goes missing, stolen or leaked through poorly-maintained pipes, Mbaruku Vyakweli, director of communications at the Nairobi Water and Sewerage Company, told me.

Or the electricity, hit on too many days by power cuts which stall business and leave home freezers slowly thawing.

Roads? There’s a massive upgrading program going on, which will make it easier for commuters living outside town to avoid jams. For the rest, whose homes are along the single-file lanes bisecting the “leafy suburbs”, gridlock is increasingly a reality, not an over-used phrase to describe a minor jam.

None of this seems to be slowing the pace of construction, however.

Down in Nairobi’s city center this morning, hundreds of property developers and their marketing minions will gather for the launch of a four-day Home Expo, where architects’ models in glass displays will tempt investors and potential owners alike.

The newspapers are littered with colorful advertisements for new two, three, or four bedroom apartments – Villa Maria, Chiluma Apts, Bellcrest Gardens, River Gardens. Prices? An average $201,951.

Where, really, is the money coming from to build and then to buy these places? I’ve heard many answers, the wildest of which is that all these apartments are being funded with ransoms collected by pirates in neighboring Somalia. I’ve done the math. It doesn’t add up.

The more prosaic explanation is that Kenya’s banks, freed from being forced to fund the government, now have money to offer in retail loans to personal account holders. At the same time, the country’s relative stability means its international credit rating has improved, allowing for more borrowing.

Finally, the country’s richest few, and its many living in the diaspora overseas, feel far more confident than in the past to save their money here not abroad, and to plow it into home-grown investments.

All well and good. But we’re talking here, as I said earlier, about the very top of Nairobi’s pyramid. What about the growing millions maybe a generation out of the slums, earning a salary, but a low one, with little history with their banks?

Very recently, there appears there’s been a shift. The demands of this massive market, winning access to mortgages from expanding microfinance institutions, are suddenly being addressed.

They’ll struggle for years to afford the near $200,000 prices of the swanky blocks close to the city center. But out on those highways, the homes beneath those red-roofs paving Masailand could soon be theirs.

Several firms have broken ground on what one architect calls “low cost, high life” developments. For example, Jericho, the Kenyan-Israeli-British team building one of Nairobi’s swankiest shopping and office centers, The Greenhouse, are next focused on Sunset Boulevard.

This is a complex of 2,024 budget apartments out beyond the international airport, where costs range from $24,000 for one bedroom to $48,000 for three.

With improved rail links into the city, and an upgraded road, these plots are increasingly attractive to those yearning to clamber onto the first rung of the home ownership ladder.

Efforts are even being made to "decongest" the slum areas themselves, as international donors plow money into basic apartment blocks, connected to water and power, where rents are – in theory – controlled.

Where all this leaves us, if we peer into the crystal ball of the future, is hard to judge. In a dream world, light rail systems will snake into town, leaving roads clear. New building standards will ensure a greater proportion of new developments are given over to green space, not concrete jungles.

The middle class, still expanding, will have access to value-for-money credit, and will be paying mortgages on their dream homes, light years from the tumbledown shacks in which their grandparents lived.

In reality, the prognosis is bleaker. There’s the risk of the credit boom forcing a burst in the bubble we’re seeing now (some I talk to tell me that won’t happen, though). There could be repossessions, negative equity, thousands forced back down the ladder by several rungs, or thrown off it altogether.

The snail pace of regulatory reform will mean that it will be years, possibly decades, before the construction industry is properly scrutinized. The long-term impact of corners cut now is simply unknown.

And, in the meantime, the cranes keep on turning, the scaffolding keeps on rising, and Nairobi, unsure even of how it will look afterwards, keeps on going under the plastic surgeon’s knife.