Investment Analysis, Unit Yield, and ROI Explained

Introduction

Nairobi’s population is booming, and with it, the demand for affordable rental housing is on the rise—especially in satellite estates around the city. As central locations become saturated and expensive, outlying areas such as Utawala have become hotbeds for real estate development. Investors are increasingly drawn to these regions due to their affordability, connectivity, and untapped rental potential.

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Utawala, situated along the Eastern Bypass, has evolved from a sleepy peri-urban area into a fast-growing suburb bustling with commercial and residential activity. This makes it one of the best places to build apartments in Nairobi today.

So, if you have a budget of Kshs.60 million, what kind of apartment development can you set up in Utawala? How many rental units can you build? What are the expected monthly and yearly returns? And most importantly, what will your return on investment (ROI) look like?

This article explores all these questions in detail, offering a clear roadmap for anyone considering apartment construction in Utawala. From land acquisition to rental income projections, we will break down the costs, benefits, and long-term investment potential of such a project.

Why Utawala is a Growing Apartment Investment Hub

Utawala is no longer under the radar for savvy property investors. Located along the Eastern Bypass, this neighborhood benefits from seamless connectivity to key economic nodes including Jomo Kenyatta International Airport (JKIA), Nairobi CBD, Embakasi, Syokimau, and Mombasa Road. This makes it attractive for both commuters and airport-related professionals.

The area has seen a rapid population increase, fueled by urban sprawl and the migration of working-class families looking for affordable accommodation options. The growing number of learning institutions and colleges in the area has also led to a surge in student housing demand, particularly for bedsitters and one-bedroom units.

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Furthermore, land in Utawala remains relatively affordable compared to areas like South B or Lang’ata. This low land entry cost, combined with rising rental demand, makes Utawala an ideal location for property investment in Nairobi.

The availability of utilities, ease of access to construction materials, and a developing road network further bolster Utawala’s potential as an apartment investment hotspot.

Land Cost Estimates in Utawala

Land is the cornerstone of any real estate venture. In 2025, the average price for an 1/8-acre plot in Utawala ranges between Kshs.6 million to Kshs.8 million, depending on proximity to main roads and available infrastructure.

For a multi-unit apartment building, a ¼-acre plot is ideal, providing enough room for a 3- or 4-story block, parking space, and amenities. This would typically cost around Kshs.12 million to Kshs.14 million.

Other associated costs include:

• Land preparation (excavation, fencing, leveling): Kshs.500,000 – Kshs.800,000
• Legal and title transfer fees: Approximately Kshs.300,000 – Kshs.500,000

Assuming a purchase price of Kshs.13 million, and including preparation and transfer costs of about Kshs.700,000, you would spend roughly Kshs.13.7 million on land acquisition.

That leaves approximately Kshs.46.3 million for construction and soft costs—enough to put up a mid-sized apartment block with a decent unit mix.

Construction Budget Allocation

The next major cost is the actual construction. On average, construction costs in Nairobi range between Kshs.25,000 to Kshs.35,000 per square meter, depending on finishes and structural complexity.

Here’s a breakdown of how your construction budget could be allocated from the remaining Kshs.46.3 million:

• Architectural design & approvals (5% of construction): ~Kshs.2.3 million
• Bill of Quantities (BoQ), engineering & structural drawings: ~Kshs.1.5 million
• Statutory approvals (NCA, NEMA, Nairobi County): ~Kshs.500,000 – Kshs.700,000
• Main construction (labour + materials): ~Kshs.40 million
• Contingency and supervision (10%): ~Kshs.2 million

Assuming a reinforced concrete structure (beams, columns, slab) with masonry infill walls, you can comfortably build a 3–4 story block, especially with economy-grade finishes suitable for rental income in Utawala.

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Possible Apartment Design Options

With the available construction budget and land size, here are the most viable apartment design options:

Option A: Bedsitter Apartment Complex

• Number of floors: 4
• Total units: 45–50
• Unit size: 20–25 m²
• Target market: students, singles, young professionals
• Pros: High rental yield, low vacancy rate
• Cons: Higher tenant turnover, management intensive

Option B: 1-Bedroom Apartment Block

• Number of floors: 3
• Total units: 20–24
• Unit size: 35–45 m²
• Target market: couples, small families
• Pros: Stable tenants, higher rent per unit
• Cons: Lower yield than bedsitters

Option C: Mixed Development

• 30 bedsitters + 10 one-bedroom units
• Number of floors: 3 or 4
• Pros: Diversified income, reduced vacancy risks
• Cons: Slightly higher design and plumbing costs

This mixed-use model is increasingly popular in apartment investment in Nairobi, especially for developers aiming for a balanced tenant profile.

Rental Income Estimates

Let’s now estimate the monthly income from each scenario using current market rental rates in Utawala:

• Bedsitters: Kshs.7,000 – Kshs.8,500
• 1-Bedroom: Kshs.11,000 – Kshs.13,000

Scenario A: 50 Bedsitters

• Average rent: Kshs.8,000
• Gross monthly income: Kshs.400,000
• Annual income: Kshs.4.8 million

Scenario B: 24 One-Bedroom Units

• Average rent: Kshs.12,000
• Gross monthly income: Kshs.288,000
• Annual income: Kshs.3.46 million

Scenario C: 30 Bedsitters + 10 One-Bedroom Units

• Bedsitter income: 30 x Kshs.8,000 = Kshs.240,000
• 1-Bedroom income: 10 x Kshs.12,000 = Kshs.120,000
• Gross monthly income: Kshs.360,000
• Annual income: Kshs.4.32 million

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Note: These figures assume 100% occupancy. A realistic projection would consider 90% occupancy, reducing monthly income slightly.

Annual Return and ROI Calculations

Now let’s evaluate the net income and determine your return on investment (ROI).

Let’s use Scenario C (the mixed development), which generates Kshs.4.32 million/year.

Annual Operating Expenses (estimate 20%)

• Property management: Kshs.300,000
• Repairs & maintenance: Kshs.250,000
• Water & electricity (common areas): Kshs.150,000
• Security (guards, CCTV): Kshs.200,000
• Total expenses: ~Kshs.900,000

Net Annual Income = Kshs.4.32 million – Kshs.900,000 = Kshs.3.42 million

ROI = (3.42 million / 60 million) × 100 = 5.7%

With aggressive rent collection and 95%+ occupancy, the ROI can stretch to 7%–9%, especially if rents increase annually.

Payback Period and Long-Term Value Appreciation

The payback period measures how long it takes to recover the initial investment. Based on Scenario C’s net income of Kshs.3.42 million:

Payback Period = Kshs.60 million / Kshs.3.42 million ≈ 17.5 years

However, this does not factor in land appreciation and rental growth, which can significantly shorten the effective payback period.

Historically, land prices in Utawala have appreciated by 8%–12% annually. Rents also tend to increase by 5% per year, depending on inflation and market demand.

After 10 years, the asset (building + land) could be worth over Kshs.100 million, providing strong capital gains in addition to rental returns.

Challenges and Risks

No investment is without risks. Some of the common pitfalls in apartment construction in Utawala include:

• Cost overruns: Material price fluctuations and labour shortages can inflate your budget.
• Approval delays: Getting NCA, NEMA, and county approvals may take longer than expected.
• Vacancy risk: Misjudging your target market can lead to prolonged empty units.
• Property management issues: Poor tenant screening or lax maintenance reduces income.

Mitigation Tips:

• Hire qualified architects and quantity surveyors
• Work with experienced contractors
• Conduct a thorough market study
• Set aside a contingency budget (10%)
• Use digital tools for tenant management and marketing

Conclusion & Recommendation

A budget of Kshs.60 million is sufficient to launch a profitable apartment investment in Utawala, Nairobi. The location offers strong rental demand, rising property values, and room for further development.

Among the three development options, the mixed-use model (bedsitters + one-bedrooms) presents the best balance of high rental yield, market demand, and diversified tenant risk.

With proper planning, the right professionals, and active property management, your investment can generate strong monthly cash flow and long-term asset appreciation.

If you’re considering apartment yield in Kenya, few places offer a better opportunity than Utawala. Now is the time to turn that Kshs.60 million into a lasting source of income and wealth.