Real estate sector breathes post-election sigh of relief

By Steve UMIDHA

Property developers in the housing market Wednesday expressed confidence that the once vibrant sector will spring back to life sooner than later now that the country’s elections are over.

Heading into his first order of business – the newly elected President William Ruto is expected to unveil his cabinet next week, in what property investors expect will offer “a great deal of needed direction” for the industry that has struggled to shrug off the effects of Covid-19 and general 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,” offered 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, President William Ruto said the government will roll out a social and affordable low-cost housing program, targeting an average of 250,000 units every year. It will also engage TVET institutions to provide necessary skills to enable the Jua Kali industry to supply standardized products for the housing program.

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 homeowners.

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,” offered Kipchumba.

Property related taxes naturally shape housing markets by influencing the costs of buying, renting, or investing in homes and apartment buildings.

Understanding how changes in property taxes affect households and community development, therefore, allows local jurisdictions to more effectively design their tax systems.

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.

Figures by the Central Bank of Kenya (CBK), for instance, shows fresh credit to the real estate sector rose 3.60 percent to Sh460 billion between July 2021 and March 2022, while non-performing bumped 11.35 percent to Sh78.5 billion.

The effect of high taxation and rising inflation has seen a lackluster supply of homes and consumer confidence in the housing market has been falling as a result, but that could change according to various sentiments from market players. Despite pandemic-related mortgage bailouts seen to be expiring.

The cost of steel prices, for instance, has subsequently affected the country’s construction industry, which heavily relies on steel for such functions as installation of reinforcing bars, manufacturing of heating and cooling equipment as well as internal fixtures and fittings.

As a result of the rising costs, local manufacturers of steel products have increased prices of goods ranging from construction bars to galvanized sheets and steel tanks to reflect soaring metal prices in the global market.

Real estate sector grew by 6.1 percent in the first quarter of 2022, a slight slowdown in the growth rate compared to the corresponding quarter in 2021, according to figures by Statista. The value added by real estate activities to the country’s Gross Domestic Product (GDP) expanded by 6.7 percent, during that period.