Construction lifts off after virus shocks
Friday, June 4th, 2021 00:00 | 2 mins read
Steve Umidha @UmidhaSteve
A raft of policy reforms and relief measures targeting Kenya’s construction industry could have paid off as the market starts recording an increase in requests for home loans.
This as investors who had frozen investments in the sector at the peak of the Covid-19 pandemic crisis return to the market on improved business environment.
Some of the measures making investment in homes ideal include lower annual interest rates on home loans, nearly half the prevailing market rates to 7 per cent.
The Kenya Mortgage Refinance Company (KMRC) has also been given the sector the much needed boost, especially for Kenyans earning below Sh150,000 per month.
Further, the State has also made it easier for Kenyan’s to withdraw up to Sh7 million or 40 per cent of their pension savings to purchase affordable housing units to boost sector activities.
“During the ongoing pandemic period, we have seen a shift in customer preferences on designs, with many first time home buyers looking for responsive homes and units that can help them to flexibly navigate emerging challenges like the pandemic and allow them to continue operating and live healthy,” says George Mburu, the Chief executive of Mizizi Homes.
Mburu says that the housing sector became the first line of defence against COVID-19, and believes it is helping to lessen the adverse impact of the virus on the economy during the pandemic.
Iverson Ongira, a real estate consultant says the budget which will be unveiled next week Thursday should consider these changing dynamics and come up with housing policy reforms that advocate for development of houses for the future.
“To further improve affordability, the government should also come up with ways of freeing up public land to private developers at subsidised costs or payable in a flexible long-term period.
This will significantly reduce the cost of construction with the benefits set to trickle down to Kenyans and the prospective homeowners,” says Ongira.
The experts now want the government to review Value Added Tax (VAT) on construction materials – a key component that is felt could spur the sector’s growth.
The revision of the VAT from 14 to 16 per cent earlier in the year, saw the cost of key building materials increase and this now stands in the way of delivering affordable houses.
“A downward review of the VAT or revoking it entirely is welcome,” says Mburu.
The first quarter of 2020 saw the government of Kenya issue ministerial directives concerning social, health and safety requirements and impose curfews, travel restrictions and county lockdowns.
The move negatively impacted various property segments, including retail, commercial, travel, hospitality and leisure.
In the first quarter, Hass Consult data indicated that land prices in Nairobi and the surrounding counties of Kiambu, Kajiado and Machakos increased in the three months to March on the back of ongoing recovery from coronavirus hardships.
HassConsult quarterly property pricing index said land prices increased by 0.2 per cent, which is the fastest growth since the country reported the first Covid-19 case in March last year.