Tremendous Trends Expected in The Real Estate Sector

Kenya is projected to have the fastest economic growth rate in Africa in 2021 according to The World Bank.  The rate is estimated to be 6.9% which is higher than what the Kenyan government predicted earlier on as 6.4%.

Despite the negative economic effects of Covid-19, the economy in general has remained resilient and this has also been evident in the real estate sector.

As the country continues to recover from the negative impact of Covid-19, below are some of the expected trends in the real estate sector in 2021.

Summary

  • Kenyans have less disposable incomes and this means that investment companies and developers will need to offer more affordable products.
  • As the population growths in major cities, satellite towns such as Kangundo Road, Athi River, Ngong, Kitengela, Ruai, Kamulu, Joska, Malaa etc. will continue to witness increase residential settlement by Kenyans.
  • Kenyans living and working in diaspora are expected to continue investing in real estate to build their retirement homes.

 

Increased Digitization of Services

22.86 million Kenyans are internet users according to Kenya’s Digital 2020 report. This clearly shows that majority of Kenyans are likely to spend their time online.  To reach this audience, real estate companies will continuously invest in their digital spaces to make investment convenient.  

Some of the innovations expected to increase include virtual tours to projects, applications for buying and selling properties, online signing of documents, chatbots, digitization of land records by Ministry of Land etc.

All these will make it convenient and efficient to invest in real estate in Kenya.

 

Growth of satellite towns which will lead to appreciation of land prices

As the population growths in major cities, satellite towns such as Kangundo Road, Athi River, Ngong, Kitengela, Ruai, Kamulu, Joska, Malaa etc. will continue to witness an increase in residential settlement by Kenyans moving away from busy city centres.

Notably, these are the places where a number of them previously invested in affordable land and the areas have now opened up due to infrastructural growth.

Ngong area for example, has witnessed tarmacking of key roads such as Ngong – Suswa road, expansion of Ngong Road and construction of SGR and SGR station.

This has led to massive residential developments by Kenyans who are able to live here and access Nairobi CBD conveniently. This will further cause an appreciation of land prices in such an area and the rest.

 

Increased use of alternate building technologies by developers

The price of building materials affects the price of a building once complete. In 2018, the Kenya Bureau of Statistics Economic Survey indicated that the cost of construction materials increased by 3% and this in turn increased the cost of residential buildings.

In 2021 this is expected to be higher due to a number of factors. For example, various county governments put up strict measures on sand harvesting due to the environmental impacts and this has led to increased prices of sand which is a major component in construction.

To balance between affordability and quality of buildings and timely delivery to clients, developers will need to deliberately embrace and learn on how to use new technologies in construction industry such as use of green/recycled materials, prefabricated panels among others.

This will ultimately reduce construction time and the cost.

 

Demand for more affordable properties by investors

In 2021, all taxes have reverted back to normal and that is 30% PAYE and 16% VAT. New taxes have also been introduced such as Digital Tax and this will mean reduced incomes to Kenyans.

With Kenyans already experiencing reduced and lost incomes as a result of COVID-19 investment companies and developers will need to offer more affordable products to Kenyans.

 

Reduced demand for office and commercial spaces

Some businesses fully adopted a work-from-home policy in order to ensure continuity of their operations after Covid-19 outbreak. Some have reduced their office spaces and this has resulted in a reduced demand for office spaces.

However, this is not to mean that companies will not operate physical offices it means that developers will need to reconsider the cost and also their designs that will need to incorporate co-working spaces for various people.

 

Increased diaspora remittances channelled to real estate

In 2020 Kenyans living in diaspora sent home over Ksh 331.9B according to the World Bank. This is despite the impacts of Covid-19. The remittances were channelled to health care, education, families and real estate investments.

The population estimated to be over 3 million has continued to invest massively in real estate either for their future investments needs or for their retirement homes when they come back to the country.

With this in mind real estate companies will continue offering Kenyans in diaspora genuine projects and delivering title deeds to them as they continue to contribute towards the growth of their home country.

 

Reuben Kimani is the Chief Executive Officer, Username Investment Limited