Kenya and Ethiopia Forge Historic Deal to Build 3,000km High-Speed Railway in 2025

In a groundbreaking development, Kenya entered into a momentous agreement with Ethiopia to construct a state-of-the-art 3,000-kilometer standard gauge railway network, cementing their commitment to enhancing regional connectivity and trade.

The project, known as Lapsset, short for the “Lamu–South Sudan–Ethiopia Transport Corridor Project,” is set to commence in 2025, marking a significant leap in East African infrastructure development.

The Lapsset Corridor Program

The Lapsset Program is Eastern Africa’s grandest and most ambitious infrastructure endeavor, uniting three nations- Kenya, Ethiopia, and South Sudan.

The vision behind it is to build a high-speed electric railway from Kenya’s newly completed Lamu Port to the town of Isiolo, located approximately 200 kilometers northeast of Nairobi.

From Isiolo, the railway line will diverge into three routes, seamlessly connecting Lamu, Nairobi, Addis Ababa in Ethiopia, and Juba, the capital of South Sudan.

In addition to the single-track rail, the LAPSSET corridor encompasses oil pipelines, a refinery, a power plant, roads, and airports, amounting to an estimated total cost of around $22 billion.

Presently, Kenya has completed construction of three out of the 32 berths at the new Lamu port, along with an airport and a road linking Isiolo to Moyale, a border town in Ethiopia.

This proposed railway is poised to assist Ethiopia in diversifying its port options and reducing reliance on the Eritrean Red Sea ports of Assab and Massawa, as well as Djibouti.

Furthermore, the project offers South Sudan an alternative port to its current one in Port Sudan.

Financing and Collaborative Efforts for Lapsset’s Success

The Lapsset Authority has expressed confidence in the project’s viability, citing an anticipated internal rate of return exceeding 12%.

To ensure the successful realization of this colossal project, Kenya is actively seeking $9 million in funding from the African Union Infrastructure Fund.

These funds will be allocated to conduct comprehensive feasibility studies, meticulously assessing the technical and economic viability of the railway.

The Cabinet Secretary for Roads and Transport and Kipchumba Murkomen recently announced his commitment to collaborate with Ethiopian counterparts to secure joint financing for the Lapsset project, underscoring the importance of cross-border partnerships in the endeavor.

This historic agreement with Ethiopia closely follows Kenya’s pact with Uganda to jointly raise $6 billion for the extension of the SGR from Naivasha in Kenya to Uganda’s capital, Kampala, showcasing the region’s dedication to bolstering connectivity and trade.

Lapsset is being heralded as the most extensive infrastructure project in Kenya since it gained independence in 1963. Its successful execution is expected to have far-reaching implications, significantly enhancing regional trade and fostering economic development across East Africa.

Impact on Cities and Real Estate

The LAPSSET Corridor, spanning over 2000 kilometers from Lamu to Isiolo, and from Moyale to Isiolo, extending further to Lodwar and Nakodok, encompasses various components. These include the development of three airports and resort cities in Lamu, Isiolo, and growth areas with a focus on Special Economic Zones for value-addition centers, aiming to integrate local economies along the route.

Over the past four years, land prices have surged by three to five times their previous value. For instance, in Lamu, an acre now costs Sh4 million, compared to less than Sh1 million four years ago.

Similarly, in Isiolo, a similar parcel commands Sh7 million. As the Lamu Port-South Sudan-Ethiopia transport corridor progresses, experts anticipate further price hikes, driven by developers and land speculators foreseeing lucrative returns, especially in real estate and service sectors.

The Lapsset project is poised to bring about a transformative impact on the cities and towns along its planned route, presenting both opportunities and challenges.

1. Reduced travel time: The travel time will be slashed from three days to just around 10 hours, resulting in a substantial reduction in transportation expenses. This includes savings from avoiding overnight stays, reduced wear and tear, and lower vehicle maintenance costs.
2. New Economic Hubs: The introduction of high-speed rail stations in various cities and towns will likely spur economic growth and development. These stations will become new economic hubs, attracting businesses, industries, and trade. For instance, cities like Isiolo and Nairobi can expect a surge in economic activities, including logistics, tourism, and manufacturing, as they become key railway junctions.
3. Increase in Land value and Emergence of new trade centers: The establishment of railway stations, such as those along the Isiolo–Moyale road, not only leads to a surge in real estate demand and development but also results in increased economic activities.
   Counties like Meru, Turkana, and Lamu have experienced heightened investor interest, leading to the emergence of new trade centers and the transformation of previously non-vibrant towns. Facilities in the real estate, financial, and hospitality sectors are experiencing robust growth. This presents significant opportunities for real estate investors, as it can potentially lead to increased property values and rental rates.
4. Improved Accessibility: Cities and towns connected by the Lapsset railway will witness improved accessibility, making them attractive places to live and work. This enhanced connectivity may lead to population growth in these areas, driving up demand for housing and infrastructure development.
5. Infrastructure Challenges: While the railway project promises growth, it also presents challenges. The influx of people and businesses may strain existing infrastructure, necessitating investments in roads, utilities, and public services to accommodate the anticipated growth.
6. Urban Planning: City and regional authorities will need to engage in meticulous urban planning to ensure that the growth driven by the railway project is sustainable and well-managed. Zoning regulations, land use policies, and infrastructure development must be carefully considered to create vibrant, livable, and sustainable urban environments.

In conclusion, the Kenya-Ethiopia Lapsset railway project represents not only a major leap in infrastructure development but also an opportunity for cities and towns along its route to thrive.

The impact on real estate markets will largely depend on how effectively local authorities and investors seize the opportunities presented by this monumental project. As the railway brings newfound connectivity, it also ushers in a new era of urban development and economic growth for the East African region.