Development control in many cities across developing nations has traditionally been an administrative exercise, where developers submit plans, obtain approvals, and proceed with construction. As urbanisation accelerates, cities are increasingly treating development rights as economic instruments that can finance infrastructure, guide growth, and preserve urban character.

Nairobi City County’s newly gazetted Development Control Policy 2026 reflects this shift through the introduction of two key instruments: Development Impact Fees (DIF) and Transferable Development Rights (TDRs), commonly known as Air Rights. Development Impact Fees require developers to contribute towards infrastructure needed to support additional density, while Transferable Development Rights allow landowners in protected or low-density areas to sell unused development potential to developers in designated growth zones.

The significance of Nairobi’s Development Control Policy 2026 lies in how Development Impact Fees (DIFs) and Transferable Development Rights (TDRs) are designed to work together to finance infrastructure, influence housing markets, and direct urban growth. This article examines the county’s proposed framework and draws lessons from New York, São Paulo, and Mumbai to assess the opportunities and challenges associated with implementing both instruments within a single development control regime.

The Architecture of Nairobi City County’s Development Impact Fees and Transferable Development Rights

Before assessing the potential impacts of the policy, it is important to understand how the two instruments are designed to operate. While both seek to influence urban growth, they serve different functions within the development control framework. Development Impact Fees are intended to capture a portion of the infrastructure costs generated by new development, while Transferable Development Rights create a market mechanism through which development potential can be transferred from protected areas to designated growth zones.

a) Development Impact Fees: Financing Infrastructure Through Growth

The Development Impact Fee is conceived as a mandatory, one-time contribution paid by developers to offset the infrastructure demands generated by a new development. In contrast to traditional models that rely heavily on public budgets or donor funding, the DIF seeks to establish a self-financing urban infrastructure framework in which growth directly contributes to the cost of supporting growth.

Under the policy, payment of the fee is triggered at the Building Permit stage and is a prerequisite for both development approval and eventual occupancy certification. The fee will be calculated through the county’s e-permit platform using a formula that incorporates gross floor area, land-use category, and location-specific infrastructure pressure.

DF = (Gross Floor Area) × (Use Class Factor) × (Location Factor)

As a result, high-intensity commercial developments in congested areas are likely to attract higher charges, while strategic regeneration areas may benefit from lower rates intended to stimulate investment.

Revenue collected from the fee will be ring-fenced within the Nairobi Urban Infrastructure Reinvestment Fund (NUIRF), a special revenue fund established to finance roads, drainage systems, sewerage networks, water infrastructure, and public amenities. By directly linking development approvals to infrastructure financing, the county hopes to address a long-standing challenge in Nairobi’s urban development pattern: rapidly increasing densities without corresponding investment in supporting infrastructure.

b) Transferable Development Rights: Creating a Market for Density

Complementing the DIF framework is the introduction of Transferable Development Rights, commonly referred to as Air Rights. Rather than treating development potential as a fixed entitlement attached to a parcel of land, the policy allows development rights to be separated, traded, and transferred between designated locations.

Under the proposed framework, low-density residential neighbourhoods, heritage areas, environmental protection zones, green corridors, and riparian reserves function as sending zones. Property owners within these areas can monetise unused development potential by transferring it to developers operating in designated receiving zones.

These receiving zones include major growth centres such as the CBD, Upper Hill, Westlands, and Transit-Oriented Development corridors located within 800 metres of major public transport stations. Developers purchasing additional rights can exceed standard density controls by acquiring additional Floor Area Ratio (FAR) or building height allowances beyond baseline planning limits.

In practical terms, the framework transforms density into a tradable economic asset. Landowners in protected areas are compensated without requiring direct public expenditure, while developers gain access to additional development capacity in strategically important growth locations.

To support the system, the county intends to establish a formal valuation and registration framework through a future Physical and Land Use Planning By-Law, alongside a digitised register of development permissions managed through the Nairobi Planning and Development Management System. The long-term success of the market will depend on transparent valuation methodologies, efficient administration, and sustained demand for higher-density development within receiving zones.

Case Studies

The introduction of Development Impact Fees (DIFs) and Transferable Development Rights (TDRs) places Nairobi within a broader tradition of cities using market-based planning instruments to influence urban growth. While the two mechanisms pursue different objectives, experiences from New York and São Paulo demonstrate how development rights can be leveraged to achieve both spatial and fiscal planning goals.

a) New York: Preserving Urban Assets While Directing Growth

New York’s Transferable Development Rights (TDR) system emerged as a response to the challenge of accommodating growth while protecting landmarks and other valued urban assets. Under the framework, property owners can transfer unused development potential from protected sites to designated receiving areas, allowing density to be concentrated where it is most appropriate.

The most prominent example is Grand Central Terminal, where unused development rights were transferred to neighbouring properties, enabling significant densification in Midtown Manhattan without compromising a historic landmark. Over time, the system evolved into a broader growth management tool, directing development towards areas with greater capacity while preserving heritage assets and established urban character elsewhere.

For Nairobi, the relevance of the New York model lies in its potential to balance conservation and development. By allowing development rights to be transferred from low-density residential areas, heritage precincts, environmental protection zones, and green corridors to designated growth centres, the county can accommodate additional density without relying solely on restrictive zoning controls.

b) São Paulo: Linking Density to Infrastructure Investment

While New York demonstrates how development rights can shape urban form, São Paulo illustrates how they can be used to finance urban infrastructure. Through its CEPAC programme, the municipality creates and sells additional development rights within designated urban redevelopment areas, capturing part of the value generated by planning decisions.

Revenue generated through the programme has financed major infrastructure investments, including transport improvements, public spaces, drainage systems, and other urban services. The model reflects a fundamental principle of contemporary planning: areas benefiting from increased development potential should contribute towards the infrastructure required to support that growth.

However, São Paulo’s experience also highlights important implementation challenges. The effectiveness of value-capture mechanisms depends heavily on market demand, transparent governance, and institutional capacity. When property markets weaken or development rights are poorly priced, revenue generation can decline significantly.

c) Mumbai: Leveraging Development Rights for Urban Renewal

Mumbai provides a distinct example of how transferable development rights can be used to advance broader urban development objectives beyond preservation and infrastructure financing. Since the 1990s, the city has utilised TDRs to support slum rehabilitation, public infrastructure projects, and heritage conservation.

Under Mumbai’s Slum Rehabilitation Scheme, developers who construct replacement housing for informal settlement residents are granted additional Floor Space Index (FSI) in the form of transferable development rights. These rights can be used on other sites or sold to developers seeking additional development potential elsewhere in the city. Similarly, owners of heritage buildings restricted from redevelopment can generate and sell development rights, creating a financial incentive for conservation without direct public expenditure.

The Mumbai experience demonstrates how development rights can function as a planning currency, enabling cities to deliver public benefits through market mechanisms. However, it also highlights a key challenge. In several receiving zones, the concentration of additional density has outpaced infrastructure investment, contributing to congestion, pressure on utilities, and declining levels of service.

What This Means for Nairobi

Together, these cases show that development rights can perform three distinct functions: financing infrastructure, preserving urban assets, and delivering social objectives.

a) Can Growth Pay for Growth?

Kilimani, Kileleshwa, and parts of Westlands have densified rapidly over the past decade with little corresponding investment in roads, drainage, sewerage, or water infrastructure. Development Impact Fees are the county’s attempt to internalise these costs rather than leave them to public budgets. São Paulo shows the scale this can reach when managed transparently. It also shows the risk: Nairobi’s property market is comparatively thin and less liquid, making revenue reliability a concern rather than a footnote.

b) Will Density Costs Land on Residents?

Developers pursuing additional density now face a stacked cost structure: land, construction, financing, the DIF, and the price of purchased development rights. Whether this constrains or merely reprices development depends on whether the value unlocked by extra density exceeds these combined costs. Where it doesn’t, costs typically pass through to buyers and tenants - a concern in Kilimani, Westlands, and Upper Hill, where affordability is already contested. Mumbai’s experience suggests the mechanism can be steered toward affordability rather than against it, but only through deliberate design: inclusionary offsets, rebates, and targeted incentives, not by default.

c) Will This Reshape Nairobi’s Urban Form?

Nairobi’s growth has historically been market-led, with planning control responding after it. Sending and receiving zones invert that logic, letting the county actively steer where density concentrates and where it is constrained - echoing New York’s approach to protecting heritage assets while channelling growth elsewhere. Done well, this could accelerate a more polycentric Nairobi built around transit-oriented nodes.

The Missing Variable

What New York and São Paulo share, and what Nairobi cannot yet assume, is functioning valuation infrastructure: reliable comparables, transparent registries, and enforcement capacity. A TDR market is only as credible as its pricing mechanism; without one, trading density becomes negotiation rather than market.

Mumbai adds a second, Nairobi-specific caution: a substantial share of the city’s urban fabric involves informal or contested land tenure, which the current framework does not address. TDRs presume a clear, transferable title - a presumption that does not hold uniformly across Nairobi.

Policy Recommendations

a) Establish a Transparent TDR Exchange Platform

A publicly accessible digital registry and trading system would improve price discovery, reduce transaction costs, and build the liquidity a functioning market requires.

b) Ring-Fence and Publicly Report DIF Expenditure

The framework’s legitimacy rests on trust. Annual public reporting - revenue collected, allocation, and infrastructure delivered - should be mandatory, so DIFs are seen as financing infrastructure rather than functioning as an additional tax.

c) Sequence Density Approvals to Infrastructure Capacity

Directly answering Mumbai’s caution: receiving zones should not be approved for additional density faster than supporting infrastructure can be delivered. Periodic capacity reviews should govern how much additional FAR or height a zone can absorb per cycle.

d) Build Independent Valuation Capacity Before Scaling

Given Nairobi’s thin property data and limited precedent for pricing development rights, the county should commission an independent valuation methodology and pilot the market in one or two receiving zones before expanding city-wide.

e) Clarify Treatment of Informal and Contested Tenure

Before finalising sending-zone designations, the county should explicitly address how the framework applies where land tenure is informal or unresolved, so TDR eligibility does not inadvertently exclude residents without formal title.

f) Monitor Housing Market Impacts

Because the combined effect of DIFs and TDRs on cost, supply, and affordability is uncertain, an ongoing monitoring framework should track outcomes and feed back into fee and pricing adjustments over time.

Conclusion

Nairobi’s Development Control Policy 2026 does more than introduce two new instruments - it reframes development rights as economic assets capable of financing infrastructure, protecting urban character, and directing growth, rather than treating density as a fixed entitlement attached to land.

International experience shows this can work, but only under conditions Nairobi has not yet established: transparent governance, liquid property markets, and institutions capable of valuing and enforcing what is being traded. São Paulo shows what disciplined value-capture can fund; New York shows how redistribution can protect what a city values while still growing; Mumbai shows both the promise of steering density toward social ends and the cost of letting it outrun infrastructure.

The real test is not whether DIFs and TDRs are gazetted correctly, but whether Nairobi builds the valuation infrastructure, enforcement capacity, and tenure clarity that make a market in density credible rather than cosmetic.