The government of Kenya plans to negotiate a fresh cost of leasing property. Real estate in the country is one of the fastest-growing business investments. The Kenyan real estate market has grown exponentially for the past two decades. This has been attributed to its contribution to the country’s GDP which grew from 10.5 per cent to 13.8 per cent in 2016. Demographic trends, population growth, high total returns, infrastructural development and stable GDP growth has led to increased growth and development of the real estate industry in Kenya.
A major restructuring of the rental sector is emerging following the government plan to limit the amount that a landlord can charge for leasing a house or office to the state. The government is negotiating to cut rental expenses in a move that will affect landlords profiting from inflated prices, according to Treasury Secretary Henry Rotich.
“The government has been leasing office space at higher market rates resulting in huge costs. All procurement of office accommodation by the government will be standardised with uniform cost leases and existing will be renegotiated to ensure a standard rate,” said Rotich. Moreover, this will mean that affected landlords will either cut their rents or part ways with their high profile tenants.
According to the Treasury, Rental expenses for buildings leased by the government increased from Sh 5.4 billion to Sh 5.9 billion in the year ended June 30, 2018. The new directive arrives at a time when landlords are increasingly facing tough demands from tenants which includes the waiver of deposit and reduction of the rental cost. The government seeks to reverse the increased cost of leasing property in the country.
According to HassConsultant, rents in Nairobi’s high-end detached properties declined by 4 per cent in the first quarter of 2019 due to falling demand from expatriates, who are increasingly opting to choose serviced apartments rather than stand-alone houses. The demand for serviced apartments has been on the rise and they record a relatively high occupancy rate above 70 per cent. The average occupancy for serviced apartments was 90 per cent and the revenue per room per night was Sh 12,700. The concept of serviced apartments continues to be more popular in the real estate market. More tenants are increasingly negotiating the cost of leasing property due to Increased competition, shrinking demand for property and the oversupply of high-end developments.