Real estate is poised for gain inactivity following the present-day decision to reopen financial flows into the sector by uncapping interest rates. According to East African property investment (EAPI) summit analysts, the change ensued a decline in financing that resulted in a reduction of the sector’s contribution to the country’s GDP from a rate of 8.8 percent in 2016 to 4.1 percent by 2018. 

The lifting of the caps has given rise to renewed interest by investors in the Kenyan real estate market. The mitigation of the restrictions on debt lending to home buyers or developers now comes as Acorn with the launch of the government’s Sh4.3 billion bond to fund the building of the environmentally-friendly student accommodation for 5,000 students in the country’s capital.

The establishment of new routes to housing finance and uplift of restrictions on debt financing presents a turning point for the real estate market in which has been particularly subdued. The bond also listed on the London Stock Exchange is a significant move in the country’s mission of expanding affordable housing. This also correlates with the equivalent flow of UK investments into the housing sector from the UK Africa Investment Summit.

The growth in the real estate market has slowed as commercial credit from banking sectors has consolidated in the last three years. The net growth in commercial loans declined to 8 per cent according to the Bank Supervision Annual Report by the Central Bank of Kenya, which follows the introduction of the rate cap in 2016. This was recorded as just one 12th of the 96 per cent growth rate in 2015. The majority of the new loans were allocated as refinancing for affordable housing mortgages rather than as real estate development finance. The property loans increased by 4 per cent in 2018. Stocks perceived as a higher risk or as less liquid were offloaded by the cap rate which saw banks and investors compensated for the reduced interest income.  

 

At the end of 2017, the government securities increased to 24.9 per cent from 23.4 per cent of the total banking sector assets preceding the caps. In between 2018 and 2019 the change from commercial loans to government bonds continued all round. The removal of the rate cap is expected to restore the market liquidity. This has also positively influenced the market and promises better access to mortgage credit access in the housing sector.