Four international financiers have applied to invest jointly with the Kenya Railways Corporation (KRC) in a Sh256 billion real estate plan as foreign investors eye the country’s booming property market.
The State-owned rail agency has been scouting for investors to help develop office blocks, hotels, light manufacturing industries, parking bays and shopping malls on its 320 acres of idle land surrounding the rail stations in Nairobi, Kisumu and Mombasa.
“We are looking at the four applicants and we shall reveal their details at the appropriate time. All that is important now is that they have very strong offers,” said Mr Nduva Muli, the firm’s managing director in an interview with local media without giving details.
Under the joint venture, Kenya Railways will provide the land which is shaping up to be the biggest costs item in housing construction and part financing, expected to earn the firm an estimated Sh1 billion annually in land leases, critical to support its heavy financial needs.
“We are investing in such projects so that we stop our over reliance on the government. KR will use the proceeds from the land lease to develop the railway infrastructure and the terminus.” said Mr Muli.
This comes at a time of property boom in the country that has seen home and office block prices rise 3.5 times in the past decade – a return that has caught the eye of foreign investors.
Rapid urbanisation, population growth and expansion of the middle class have emerged as drivers of Kenya’s property market that is riding on nearly three decades of underinvestment.
Kenya Railways has opened its massive land to private investors, joining the list of institutions such as the National Social Security Fund (NSSF), Centum Investment and pension schemes in rushing to tap the huge returns from the booming property market.
In Nairobi, under KRC the investor is expected to put about Sh120 billion in building shopping malls, restaurants, a manufacturing park, and two hotels with a capacity to accommodate 3,000 people.
In Mombasa, the investors will build an international trade centre, office blocks, shopping malls, and three hotels with conference facilities able to accommodate 3,000 people at a cost of Sh80 billion.
The investors will build Sh60 billion car parking complex, shopping malls, restaurants, and two hotels able to accommodate 2,000 people in Kisumu.
The projects will create a fresh income stream for the cash strapped rail firm as well as dramatically transform Kenya’s real estate landscape, especially that of Nairobi, Mombasa and Kisumu.