Here is what could lift Kenya’s property market in 2021

By Steve Umidha

Property developers are in an optimistic mood that investments from Kenyans living abroad will boost the local housing market in 2021 – despite the sector yet to shrug-off the impact of Coronavirus pandemic.

They cited global political events last year, technology and improved transparency on local projects as some of the factors that could play a key role in the sector’s recovery.

Over the last 12 months diaspora remittances increased to Sh 331 billion to November 2020 compared to Sh 304 billion a similar review period in 2019, according to figures by the Central Bank of Kenya (CBK) which is Sh 27billion more Kenyans living abroad sent home during that period despite the global pandemic that ravaged the global economy.

Indeed during that period the market witnessed an increasing trend by property dealers and brokers and landlords and tenants like negotiating flexible payment plans where possible, owing to cash flow challenges in a year that equally saw unprecedented growth in job layoffs and business closures due to Covid-19.

“Since July 2020 we have been recording higher numbers of Kenyans from the diaspora markets seeking information and investing in affordable housing units,” said Mizizi Africa Homes Chief Executive Officer, George Mburu – adding that last year’s introduction of first licensed investment fund for citizens living overseas will also be pivoted in the sector’s growth.

Kenya had in September last year introduced its first licensed investment fund for citizens living overseas, in a move that is expected to channel more of the diaspora’s money into development projects across the country.

An estimated 3million Kenyans are living mostly in North America and Europe which represents the largest source of foreign exchange for the country and send money home to their families, while direct investment is also common though studies have shown that complicated paper work and bureaucratic procedures, lack of information and informal channels often lead to unsuccessful ventures.

The fund is further expected to offer Kenya’s diaspora to make investments through the African Diaspora Asset Managers (ADAM), an investment firm that has been granted the first license of its kind for a diaspora fund by the Kenyan Capital Markets Authority (KMA).

Financial analysts have also attributed the rise in diaspora remittances to political heat that characterized US Elections as among key reasons many Kenyans are opting to invest their savings back home.

“Last week we received an incredible number of inquiries, and while most of them were school-fees related, a good number were also mortgage-related,” said Macharia who runs a micro lending business, Jijenge Credit in Nairobi.

Last year saw the majority of Kenyans heavily rely on their diaspora contacts to meet daily basic needs including food, education, healthcare and other expenses – a trend that may persist for the months ahead with most bread winners across major families still out of work.

The economic effects of the pandemic have seen most property developers suspend their projects while others grapple with their credit facilities.

In June 2020, the Central Bank announced that the value of non-performing loans (NPL) had hit Sh366 billion, a 13-year high.

Coupled with the free-falling local currency that traded at Sh111 to the US dollar on December 21, the economic outlook of Kenya’s real estate industry is cast in doubt.

But that could swiftly change this year according to financial analyst Peter Macharia, laying his hopes for increased demand for loans in the first week of January 2020.

A survey conducted by the Kenya National Bureau of Statistics in June 2020, showed that for every 10 families, 6 had their breadwinner unable to provide for them due to the pandemic.

“If this pandemic continues, in the mid to long-term, employers may take necessary measures to minimize overheads by downsizing or foregoing their office spaces,” reads in part a December 2020 statement by Knight Frank Kenya, a real estate consultancy firm.