The Enchantment of Kenya's Thriving Real Estate Market

The Enchantment of Kenya's Thriving Real Estate Market

Kenya's real estate sector has undergone remarkable growth, outpacing industries like manufacturing, services, and agriculture.

Real estate has emerged as the preferred choice for investors, surpassing once-favored investments like equities. Recent findings indicate that approximately 40% of affluent Kenyan investors have allocated a significant portion of their portfolios to real estate, viewing private rental properties as a long-term hedge against inflation and currency devaluation. Fueled by a favorable regulatory environment, building approvals in Nairobi City County have surged, directly impacting the real estate market's expansion, and prompting investors to inject over Sh162.5 billion into Kenya's capital city.

The Head of Real Estate, Banking, and Financial Services at Ashitiva Advocates LLP notes that while government policies are heading in the right direction, there is a pressing need for a more robust regulatory framework for the industry. While some positive solutions are on the horizon, concerns arise regarding new policies, such as the Finance Act of 2023, which may limit incentives and introduce new levies to broaden the tax infrastructure. These policies have the potential to undermine the progress made within the industry.

The expansion of infrastructure has played a pivotal role in enhancing the appeal of real estate for developers and investors, fueling growth in the sector. According to the Economic Survey 2023, the stretch of national roads covered in bitumen increased from 18,700 kilometers in 2021 to 19,100 kilometers in 2022. Moreover, the government's approved expenditure on housing infrastructure is projected to rise to Sh19 billion from Sh14.1 billion in 2021/22, while the allocation for road development is expected to reach Sh191.4 billion during the same period. The surge in land prices in Athi River during the first quarter of 2023 was triggered by the proposal to extend the Standard Gauge Railway to the Export Processing Zone.

The success of Kenya's growing real estate industry is greatly owed to the country's burgeoning young population, constituting about 80% of Kenya's total inhabitants. While the youth may not possess the substantial financial capacity of older generations, their creative investment strategies continue to propel industry growth. Chairman Ondwari enthusiastically heralds this fact as evidence of the real estate boom. The youthful populace may choose to invest in urban apartments through the affordable housing program, particularly in places like Pangani. Their intention is not to live in these apartments themselves but to generate additional rental income by renting them out, possibly through platforms like Airbnb.

Since 2017, diaspora remittances to Kenya have witnessed a significant increase, as revealed by a recent survey by the Central Bank of Kenya. Remittances have grown by over 200%, reaching Sh453.6 billion in 2022 from Sh215.4 billion. Notably, more than half of the remitted money is utilized for buying land, repaying mortgages, or developing properties. Naftali Oswere, the founder of Bantu Homes, who has lived and worked abroad, confirms this trend. He explains that for many individuals residing overseas, investing in real estate is the most logical way to utilize their funds in their home country. Oswere attributes this inclination to factors such as a strong dollar and favorable policies that facilitate money transfers for real estate investments for Kenyans in the diaspora.