Because "peponi" is itself a locative. When talking about the location of a location, you use "ni". You're simply equating one location with another, not saying that a location is located in another.
Nyumba iko wapi? = Where is the house?
Nyumbani ni wapi? = Where is home?
Just to make it clear for me... Even if mapepo is demons, peponi, which should mean something like the place of demons, means heaven/paradise??? Shouldn't then mapepo be angels?