Real estate sector breathes post-election sigh of relief
Property developers have expressed confidence that the once vibrant real estate sector will spring back to life sooner than later with end of electioneering period.
Heading into his first order of business, President William Ruto is expected to unveil his Cabinet next week, in what property investors anticipate will offer “a great deal of needed direction” for the industry that has struggled to shrug off the effects of Covid-19 and a generally stressed economy.
“We will also begin to see increased financial commitments and fundraising for real estate projects as developers begin to implement long term plans and take advantage of government-backed housing schemes,” said Mizizi Africa Homes CEO George Mburu.
Investor confidence has been at its highest levels in an electioneering year, and the momentum could carry on, according to him, owing to the new administration’s resolve to accelerate low-cost housing agenda to bolster job creation for youth- there will be increased activities in the built environment. “We will also begin to see increased financial commitments and fundraising for real estate projects as developers begin to implement long-term plans and take advantage of government-backed housing schemes,” said Mburu.
In his maiden speech, Ruto said the government will roll out a social and affordable low-cost housing programme, targeting an average of 250,000 units every year.
It will also engage technical and vocational education and training (TVET) institutions to provide necessary skills to enable the Jua Kali sector to supply standardised products for the housing programme.
The high cost of construction materials coupled with high cost of living remain the biggest hurdles that stand in the way of many first-time home owners.
This, according to Tim Kipchumba, the chief executive of real estate firm Questworks, has worsened on rising inflation and high taxes slapped on Kenyans, hindering their purchasing power.
“The market has had to contend with a myriad of challenges since the pandemic hit, including taxes on raw materials used in the construction sector…these combined with other factors, has seen developers adjust their pricing to match up the inflation figures,” said Kipchumba.
Property related taxes naturally shape housing markets by influencing the costs of buying, renting, or investing in homes and apartment buildings. The housing market has endured a sustained downturn in recent years with developers struggling to service loans on the property, resulting in bankers hiring auctioneers to forcibly sell houses to recover accrued debts.
Central Bank of Kenya (CBK) figures, for instance, shows fresh credit to the real estate sector rose 3.60 per cent to Sh460 billion between July 2021 and March 2022, while non-performing loans jumped 11.35 per cent to Sh78.5 billion.