Kenya’s real estate industry continues to experience significant growth over the years. Nairobi has long been the main focus of Kenya’s property market, with satellite towns like Ruaka, Mlolongo, Athi River also coming up. The Kenya National Bureau of Statistics shows the real estate sector’s year-on-year growth during the third quarter of 2015 was 5.4 per cent, with the overall sector contribution to Gross Domestic Product being at 8%.The Kenyan government recognizes the potential in real estate development and has therefore taken a number of steps to support the industry.
In response to the country’s significant growth in its real estate sector, the government has, taken steps to improve the legal and regulatory framework in real estate for small scale investors. This has seen the introduction of a framework for real estate investment trusts (REITS). These are regulated investment vehicles that enable collective investment in real estate. Real Estate Investors, both retail and corporate, are allowed to pool funds under the umbrella of the REIT and then engage in real estate projects. So far, the Capital Markets Authority (CMA) has granted approval for the issue and listing of commercial and residential for two local companies.
The government has also introduced a mortgage scheme for civil servants, in an effort to provide affordable housing. Civil servants in job groups G, H, J and equivalent grades in public service will be able to get up to Sh6 million for mortgage, grades A, B, C, D, E, F and equivalent grades in public service will be able to get a maximum of Sh4 million as mortgage. Public officers in job groups S, T, U and equivalent grades will access up to Sh20 million home loans, all with a mortgage repayment rate of 3 percent. This move will go a long way in boosting the property market and expanding the middle class in Kenya. Research shows that the scheme will stimulate the real estate sector which is expected to grow by at least 10 per cent this year.
Growth in the real estate sector has further been driven by government investment in infrastructure. This has provided an enabling environment, by provision of the requisite infrastructure like roads and social amenities to support property investment. This has opened up satellite towns such as Ruaka, Mlolongo and Athi River within the Nairobi metropolis. There has been a significant shift by land investors to satellite towns. Between 2007 and the second quarter of 2015, land prices in the satellite towns around Nairobi have risen sixfold, compared with fivefold growth for the inner-city suburbs, according to HassConsult.
The government has also been involved in Public-private partnerships (PPs). PPPs are arrangements between a private party and government department/entity which intends to have a function undertaken by it performed by a private party. The PPs’ have attracted private sector participation in construction and real estate development.Some of the major projects under this arrangement are the Konza Technopolis, the Lamu Port-South Sudan-Ethiopia Transport corridor (Lapsset) and houses for security forces, among others.