Change of Use and Controlling developments

Physical Planning Act (Cap 286) change of use: “The owner of Plot LR NO. AAA/AA located wherever is proposing to change the use from agricultural to residential (multi-dwelling) subject to approval by AAAA Council. Individuals, institutions etc. with objections to the proposal are requested to forward them in writing within fourteen days of this notice to The Town clerk…."

You see them mostly on Standard’s Digger Classifieds. Most people do not even notice them, others see them and fail to understand what they mean, and others simply do not care. You may never know their implication until a block of flats (5 storey) pops up next to your nice residential home. Then the guys at 5th floor have a very nice aerial view of your compound. Worse still, a church or a mosque pops up next to you and when they hold a kesha every other weekend, you start complaining and cursing.

The requirements of the law is that whenever you want to set up flats, church/ mosque, factory etc., you must apply for change of use if the current ‘use’ is not in conformity with your proposed development. What ideally should happen as the notice reads is that anyone who objects to the development proposal should raise their objection in writing to the relevant authority failure to which you should forever hold your peace. As a pre-requisite to approval of the aforementioned type of developments, the change of use approval must be sought before the plans are approved.

Most councils have failed in as far as controlling development is concerned. It is no wonder you find flats in the middle of residential developments. Equally, you find churches in the middle of estates; some are next to each other. Generally there is a serious gap in physical planning. Some Councils do not even have a Physical Planner.

Due to the existing gap, most owners of residential homes / plots in many estates have formed welfare groups to attempt to enforce planning. We know of famous and very strong resident’s welfare Associations (read Karengata, Runda, Kahawa Sukari etc). These welfare groups have largely assisted by ensuring that plans are approved by them before they are forwarded to the respective councils. They basically have a working arrangement with the council to ensure that any plans that get to the council are first approved by the association.

I always advise that wherever and whenever possible, your residential home ought to be in an area with controlled development. With demand for housing at an all-time high around Nairobi and its environs, the pressure to developers to build flats gets overwhelming and the same leads to those developments coming up even in areas initially designated for other developments.

There is a concept called zoning that most land buying companies used to embrace back then but we seem to have lost it all together. Back then, the companies (mostly ranching companies) used to acquire huge tracks of land. They’d then subdivide the land in zones where one zone would be 1 or 2 acre pieces for farming and the other zone would have ¼ acres for the members to build residential homes. This in essence meant that the residents would farm in the larger contiguous tracks and live in smaller contiguous section. This mainly protected the agricultural relevance of the shambas and also promoted living together of the residents where common services like water and electricity would be easier to supply.

Fast forward to today where agricultural land has been subdivided into tiny portions to an extent that it never makes sense to farm the portions. Back in my village which is barely 20km from Nairobi CBD, what was formerly agricultural land has been rendered useless due to subdivision into small plots and sale of the same. The government has in a big way failed to deal with this matter. Why does it allow coffee farms to be converted in residential estates when we all know we have large tracks of semi-arid land which ordinarily would be better off for residential developments? If this goes unchecked, the same will reach the bread basket of Kenya and land especially in North Rift might suffer the same fate that Central Kenya and to a large extent Western Kenya has suffered.

Sometimes back I stumbled onto some paper call it proposal by some NGO touching on the animal migratory corridor in Kitengela. The area to the South of Nairobi National Park (which is unfenced) opens up to Athi Kapiti Plains and Kaputiei, what they were calling Athi-Kaputiei ecosystem. It is wildlife-rich pastoral grasslands which is under threat from rapid construction of fences, infrastructure and residential areas. If unchecked, this unplanned growth will destroy Nairobi National Park coz the animals move in the rainy season is search of pasture. The area is owned by private ranchers and unless the government acquires the land and compensates for the developments therein, there is no other way of recovering the corridor. This is poor planning on the part of government coz it is the one that approved the developments in the first place.

One time I was selling a plot to a gentleman some place in Kitengela and he asked me whether the land is part of the migratory corridor. He was afraid of buying coz he thought one day one time the government will take up the land. I told him that what is clear is that the land is not even owned by the government and if at all the government wanted to set aside the land for that purpose, it’d definitely compulsorily acquire the land by way of compensation to the private developers there but it’s not like they grabbed the land.

Interestingly, the Physical Planning Act is adequate in its content. The biggest challenge is actually enforcement by the relevant authorities. We see serious developments cropping up in riparian reserves, sometimes rivers are diverted and other times we even see building is swamps. A classic case is some house I heard about in Githurai 45 that started sinking as it was on top of a swamp. Somebody somewhere needs to get serious.

Next post will be on the crazy world of speculators in Kenya’s real estate.

Hi marty, Im new to this forum but have been reading your posts since day 1 I must say I have gained a lot and expanded my knowledge on the land deals. Kindly include me in your mailing list kakabrotheratrocketmaildotcom thanks.God bless you for your big heart 'He Who refreshes others will be himself be refreshed'

@SG, I presume that you may not have followed the right procedure if at all you never placed the notice on the paper, an alternative to that would be a signpost at the location of the plot. Or what exactly did u miss? By the way, this is Kenya where procedures are not usually followed strictly.

I don't know much about the company but I have heard about them.

@ Marty,

Include me in ur mailing list, tgithinji@yahoo.com

Used to be employed but started a business on the side. Grew the business while still working. With time, the business grew till it made no sense to remain in employment.

Marty,
Clearly, your articles are so relevant because the scenarios you depict are things I can relate to. A lot of times, the financial education we get has no bearing to our real life situation and that is what makes us fail to utilize it fully. The same education within the context of places like Ruiru, Kitengela, and Kamulu and so on makes so much sense.

I have tried pooling resources with several friends in the past and although things worked out for a while, we didn’t change direction when we determined the initial business was too taxing for owners balancing employment and business, and that the margins were being pressured by competition and new technology. Commitment was low and break up was inevitable.

I am also lucky to have purchased land and obtain absolute title without the full understanding of the purchase process. Fortunately those were days when the properties in Kitengela and beyond were not so hot and I had some helpful & knowledgeable friends.

However, because I did not learn enough about the purchase/title process, am still waiting on my Title for a plot I bought in 2009 in Thika High Life area from a certain Kariua Mwiriukia Farmers’ Cooperative (If anyone has dealt with them I would appreciate your experience) and another I bought from Mhasibu Investment Company Limited (2011) in Nyeri, near Mt. Kenya Academy. Having read your posting about mother titles and subsequent sub-divisions, I feel I am better armed to ask relevant questions when I engage both these organizations in the future. I only hope they will deliver.

I am fascinated by the same business that James your good friend attempted - the concrete mixer business. Every day I pass by this construction site where they use truck mounted concrete mixers, concrete placement trucks and other sophisticated technology like those found on http://www.cemstone.com/index.cfm and wonder how I could have a small business version of this same technology and import some versions of the equipment and duplicate the business? Obviously like James in your article, I am under the assumption that with so much construction in Kenya, I would get enough business, but off-course when I read through your narration of James’s experience, I realize it is not a simple home run, to simply just having the tools. Here is where I will need entrepreneurial skills, a business plan and a helping hand from those in the know to realize the dream. Meanwhile it is still a dream. Talking to you might just be a starting point.

I will keenly follow your articles and comment where I can, and also add me pk dot kimse at gmail dot com to your mailing list.

The crazy world of speculators

Sometimes back in November last year I received a call from a friend called Raphael. I have in the past sold him several plots in the outskirts of Nairobi. He wanted to see me and I quickly checked my diary and confirmed availability the day after in the afternoon. When we met he was very excited and I really wanted to hear what he was up to. He produced a check book and wrote me the final check for the purchase of the last of the many plots he bought from me. I gave him a heads up on what I had then. He is the type of guy who really trusts me and sometimes he’ll just pay me deposit for a plot before even doing his due diligence. This I have seen in several clients whom we’ve dealt with in the past whereupon the trust is built overtime.

Then he told me of some land he had bought somewhere between Namanga and Kajiado. He loves adventure and in his many drives to Namanga he was shown several tracks of land by some broker I had referred him to. It was an interesting case of a Masaai who wanted to dispose his land due to some financial crisis and the offer was too good to resist. So he ended up buying 120 acres each at 10k. 6 months later the same broker he had dealt with when acquiring the land called him and informed him that there are rumours that a CEO of a blue chip company (name with-held) is planning to do a golf course on the land bordering Raphael’s land. The said rumours meant that the prices had immediately shot up to 50k per acre and the broker already had a serious client interested in Raphael’s land. The reason why Raphael was calling me was to hear my opinion on the matter. A quick calculation meant that his land was now worth 6M from 1.2M. Welcome to the crazy world of speculation in land.

If you were in my shoes, what would you have advised Raphael?

In Kenya, we got very interesting stories around. I once went deep inside Juja farm and the broker who was showing me the land was really insisting that the bypass will pass next to that land he was showing me. Well, if you are not careful, this is a ploy used to get you into the deal. We all agree that ignorance is very expensive. I am usually very unforgiving when am given wrong information. So I called an Engineer who works at KURA just to confirm where that Greater Eastern Bypass passes through. Of course I confronted the broker and informed him that he was distorting the truth.

Back to the Raphael’s story. Here is a guy who buys land and before he even knows what to do with it, another dude wants to pay for it at 5 times the purchase price all within 6 months. Who is clever here? Raphael never added any value to the land, the rumours did. The rumours keep persisting and Raphael keeps holding his land awaiting it to reach 100k per acre when another not so clever fellow will show up and give him that ridiculous offer.

"Speculation in land is basically buying on the basis of the future potential selling price rather than on the basis of its actual value. This results in rise of the prices over and above the underlying value of the land"

In most cases speculators take above average financial risk in anticipation of higher returns over short periods of time, resulting in upward price spirals than actual values. This normally happens when panic buying is witnessed in areas where infrastructure is being developed or expected to be developed.

Realtors have christened the concept and called it land banking. Kitengela, Mavoko and Thika Road areas are examples of places where this concept has been applied.

Notice how this affects the economy. Whereas the prices keep getting higher by the day, disposable income cannot keep pace with the rise in property prices. The properties get less affordable with time and soon majority of the middle class will not afford these properties anymore. You can imagine looking for a house worth 5M near Nairobi and its outskirts. After all for most guys, that is the mortgage they’d qualify for. Developers are seriously struggling and the biggest issue is rise of cost of land.

Do we try capital gain tax? Ideally, this would be charged on profit realized on sale of land purchased at a lower price and appreciated in value without the owner's participation in creating added value. In Rwanda they do this (30% tax on capital gain).

What about taxing vacant excessively large parcels not fully utilized?

Another interesting outlook is the fact that speculation will most likely withdraw capital from productive economic activities and transfers to unproductive assets lying idle somewhere. Is this good for the economy?

A valuer’s nightmare is when you value a property like that one Raphael bought and before the transaction is complete, the value changes drastically, you’d think the valuation is a joke. Over to the policy makers. In the meantime who will blame you if made hay while the sun shines? Seriously, I got no apologies for being a speculator. What about you?

Next we will look at the murky world of land buying companies which issue you with certificates, ballots etc. as opposed to titles. What is the implication??

Marty

This stood out! if only you are a policy maker chief/chiefress!

"Notice how this affects the economy. Whereas the prices keep getting higher by the day, disposable income cannot keep pace with the rise in property prices"

@marty..good analysis. At an individual level in a capitalist economy its ok to make the money out of speculation. At a moral level i personally feel its very unfair to the next generation.

I ask myself -in my generation, i can afford to live-what of my son & daughter's generation? They will only be saved when a brave person comes out with land reforms or a revolution.

What worries me is the fact that speculating on land is seen as a morally right method of making money -the church, which is a major land owner worldwide actually encourages it.
The day citizens will do an audit on the net effect of land speculation to the economy is when people will realise how damaging it is. Our generation has started feeling the effect of high land prices. The next generation will find it even harder to access a God-given resource called land, which is as important as the air we breath.
I earn a living partialy due to speculation in that when people hoard land, only very few lands are available for development hence architectural/engineering expertise to design highrise high density units to maximise use of scarce space.