Building Hope in Nairobi’s Exploding Housing Market

By Christopher Robinson @ IBM

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Kenya is enjoying a sustained period of explosive growth as global industries jostle to capitalize on the country’s 21st century workforce. IBM recognized Kenya’s potential early, and located its 12th global research lab in Nairobi in 2013. IBM Research – Africa is driving innovation in key areas including water, agriculture, transportation, healthcare, financial inclusion, education, energy, security and e-government.

Kenya Housing Deficit

But with explosive growth comes growing pains, and Kenya’s capital Nairobi is no stranger to the challenges posed by an overwhelmed infrastructure. Chief among the issues in this city of more than three million is a severe shortage of family housing units. Nationwide, Kenya’s current two-million unit housing gap is expected to increase 10 percent each year. In Nairobi, those hoping to participate in a growing economy find their efforts stymied by the lack of affordable housing, and discrepancies between urbanization and housing availability have led to an unprecedented growth of slums throughout sub-Saharan Africa. Last year Ashoka – a global organization that invests in social entrepreneurship – introduced IBM to international housing non-profit Builders of Hope to begin seeking solutions to the housing crisis.

Several key factors contribute to Kenya’s housing challenges. Among them:

  • Costly designs not suited to affordable housing – Even modest traditionally constructed homes in Africa remain out reach for most.
  • Expensive financing – Mortgage rates in Kenya are typically four times higher than those in the U.S., and qualifying for a mortgage is difficult.
  • Inconsistent (or non-existent) construction standards – An “informal” market accounts for more than 50 percent of construction in sub-Saharan Africa. Cost overruns, incomplete projects and building collapses are frequent.

To help meet the needs of middle-income individuals and those at the bottom of the economic pyramid, IBM established its partnership with Builders of Hope to transform the current system through the iBUILD mobile application concept. The goal was to create a fair, accessible and reliable mortgage, credit and construction ecosystem to enable housing market growth. To do that, we focused on improving quality, facilitating scale and enabling the local construction workforce with an emphasis on small scale construction.

iBUILD E2E process

IBM helped Builders of Hope to leverage the common techniques it uses in the U.S. affordable housing market while capitalizing on Africa’s rapid adoption of mobile technologies. By allowing users to rate and review services, iBUILD will help consumers become more informed while function as a de facto regulation mechanism. The app will connect consumers with architects, lenders, the construction authority and builders – from construction project design to completion.

By developing this ecosystem and connecting builders, home owners and banks via iBUILD, we hope to:

  • Create construction capacity (through job training and apprenticeship certifications) to help informal builders develop and demonstrate their skills
  • Lower interest rates and expand credit availability by creating standardized construction oversight and transparency tools for banks, builders and home owners
  • Refine construction cost estimates by leveraging iBUILD’s analytics
  • Introduce new lending products for homeowners and builders

IBM has a strong partner in Builders of Hope, which already has established key partnerships with Ashoka; the Jomo Kenyatta University of Agriculture and Technology; the National Housing Corporation, which determines Kenya’s housing policies; the National Construction Authority, which regulates construction; the Kenyan Federation of Master Builders; and several financial institutions.

Working through IBM’s IBM’s On Demand Community, seven U.S. Public Sector consultants led Builders of Hope through the design thinking process. The support was so successful that Builders of Hope won a place for iBUILD at MasterCard Labs’ incubation center in Nairobi. With IBM’s continued support, Builders of Hope and MasterCard Labs will launch a beta version of iBUILD within the coming months.

The IBM On Demand Community team will participate in user design sessions with Builders of Hope, MasterCard Labs and other partners in March. And following iBUILD’s release, the Kenyan government will use it to establish apprenticeship programs for construction workers. We also plan to use iBUILD to help establish new lending and service offerings, such as savings accounts and workman’s compensation, for low-income residents.

Chris Robinson is a Managing Consultant with IBM’s Business Analytics and Strategy group.