NAIROBI, Kenya, Jun 17 -The real estate sector is expected to experience significant growth in the year 2013, according to Institute of Certified Public Accountants of Kenya Chairman Benson Okundi, citing dropping interest rates.
Okundi said lower rates were likely to spur an uptake of mortgages, which would fuel the housing market boom.
The Central Bank of Kenya (CBK) early this month lowered its rate by one percentage point to 8.5 percent, a signal that commercial banks should lower their lending rates to push up demand for credit and spur economic growth in the country.
“Less than 200,000 Kenyans have mortgage facilities; this shows that mortgage facility is still not affordable. We need to seek more ways of including a greater number of people,” he said.
He said financial institutions must work out a plan to increase accessibility and affordability of mortgages with reasonable profits.
“The fact that only six percent of Kenyans own their homes, only 14,000 mortgages are issued (CBK data) and that Kenya may be seeing average growth rates of 5-6 percent over the medium term, the real estate market is the place to be over the next 10-20 years,” he revealed.
Last month Kenya Commercial Bank recorded a massive increase in the uptake of mortgages, with interest rates having gone down from 24 percent to 15.5 percent.
KCB Director of Mortgage Finance Joram Kiai told Capital Business that the uptake is expected to grow due to the lowering of interest rates, a stable shilling and stable political environment.
“We have seen a rise in individual mortgages as well as residential/rental developers and the situation seems to be getting better as we go into June,” he revealed,
Kiai said that developers are seeking into getting into the counties, as they wait for the devolved system of government to gain momentum.
“Let the government focus on basic infrastructure and let the private sector focus on real estate,” he added.
According to a new survey, mortgage lending in Kenya is still accessible to only a tiny minority – mortgage lending as a percentage of the gross domestic product (GDP) was 2.6 percent in 2010, growing at 14 percent annually.
The 2012 year book on Housing Finance in Africa conducted annually by South Africa-based Centre for Affordable Housing Finance in Africa says that only about 11 percent of Kenyans earn enough to support a mortgage.
In this regard, most middle-income earners cannot afford an average mortgage necessary to buy an entry-level house.
“Apartment sale prices have increased by 2.2 times since 2001, and the average price is Sh11.7 million at present,” the report indicates.
It also reveals that rental houses have also risen rapidly – 10 times the rate of the last two years, as landlords have sought to manage rising costs and deal with increasing demand.
Many companies have focused their current businesses on real estate; amongst them are CFC Stanbic holdings, NSSF, Liberty Life and Centum.
Mega real estate projects are being unveiled that include: Greenpark Estate by Superior Homes (Athi River) Tatu City by Renaissance Capital (Kiambu) and Thika Greens by Thika Greens Ltd.
In the year 2011/2012 National Housing Corporation disbursed 122 loans to 19 counties amounting to Sh209.6 billion.