Developers upbeat on real estate market despite polls

Tuesday, June 7th, 2022 07:30 | By
A real estate development in Nairobi. PHOTO/COURTESY

The August 9 General Election will present a litmus test for the continued growth of the real estate sector, with fears that commercial banks will tighten their lending terms towards developers as a hedge against loan defaulters.

In addition to credit crunch fears, analysts reckon that the honeymoon phase will be subdued with property tenants particularly based in hotspot areas scaling back or halting their operations amidst the uncertainties.

Necessary approvals

Cytonn Investments and real estate company, in its weekly report, said property seekers are also expected to avoid the hotspot areas or withdraw their search while awaiting the outcome of the general elections.

“In turn, both incidents are expected to affect the overall occupancy rates of various properties and lower returns to property ten. Some contractors are still optimistic and forging ahead with projects, saying this is the best time to invest in the real estate sector ants and seekers,” it said.

However, Wilson Mugambi, Architectural Association of Kenya (AAK) president told business Hub that despite the apprehension, some contractors are still optimistic and forging ahead with their projects, saying this is the best time to invest in the real estate sector.

“My personal opinion is that there is a balance in terms of optimism and pulling back. In fact, in the second quarter of this year, many of my members received inquiries for their services.

The majority are pushing to get the necessary approvals before a change of administration,” he said.

With the expected risks brought about by the elections and the unclear impacts on the property sector, developers are expected to slow down their construction plans all through the election period until the high politicking levels die down, Cytonn said in the bulletin.

Kenya National Bureau of Statistics (KNBS), Economic Survey 2022 the sector grew by 6.7 per cent in 2021 representing a 2.6 per cent points increase from 4.1 per cent recorded in 2020.

Central Bank of Kenya (CBK) data in its quarterly review on the sector performance for the period October to December indicate that gross non-performing loans increased by 7.9 per cent to Sh74.7 billion in the fourth quarter of 2021 up from Sh69.2 billion recorded in the third quarter of the same year.

It showed on on a-year-to-year basis, that the performance represented an Sh61.4 billion realised in the fourth quarter of 2020 as a result of high default rates.

To cushion themselves against the shaky economic environment, a number of landlords are expected to provide property concessions including the provision of rent and price discounts to tenants or buyers to attract or retain the existing property occupiers.

Property rates

“With this, we expect a correction in property rates with the incoming elections,” said Cytonn.

During the week, the regulator released the 2021 supervision report indicating that residential mortgages recorded a 0.9 per cent decline in the number of mortgage loan accounts in the market to 26,723 in December 2021 from 26,971 in December 2020.

Growth in the sector has been driven by improved infrastructure developments under President Uhuru Kenyatta’s Big Four agenda, which has opened areas for investment.

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