Players say 2018 holds more promise to developers due to investor confidence
4 months ago, 4 Jan 00:12
: President Uhuru Kenyatta’s five-year plan to construct 500,000 houses, access to finance and a conducive political climate are some of the key factors that will shape real estate sector in 2018. Last year, financial crunch and politics led to suppressed performance that saw developers get stuck with new housing units for a longer period. However, developers and analysts are upbeat that the sector will regain lost ground since the fundamentals that make real estate a preferred investment vehicle still exist. According to Aly-Khan Satchu, a financial analyst, 2018 will see a resurgent real estate sector. “Investors still favour real estate due to high demand that grows every year. Demand for housing and supporting infrastructure far outweigh any adverse circumstances of the past year,” he says. Lee Karuri, a developer with Resorts and Cities, says 2018 holds more promise to developers due to investor confidence after cooling of political temperatures. According to the developer whose portfolio includes Longonot Gate in Naivasha and Makuyu Ridge in Murang’a, such confidence will trigger more investments and purchases of ready units. But for the sector to grow this year, Karuri says both developers and buyers will need to get access to finance. “Developers will not build if they have limited access to cheap finances while buyers will not buy if banks continue to tighten lending to the private sector. I call this the ideal real estate ecosystem where all the cogs in the wheel run smoothly,” says Karuri. He says with foresight, developers can overcome the financial hurdle if they find a way of financing projects through alternative markets such as private equities as well as tapping into the growing foreign direct investments. “Kenya has overtaken South Africa as a destination for foreign direct investments. Most of these funds find their way into the real estate sector. In addition, joint ventures will also be ideal as they take financing pressure off one party,” says Karuri. How developers bypass key financial institutions such as banks will be a keenly watched development as the year progresses. President Kenyatta’s inauguration pronouncement to make affordable housing one of his key development planks of his final term will be another major factor that will shape real estate this year. “It is our intention to facilitate affordable housing and a home ownership programme that will ensure every working family can afford a decent home. That is why over the next five years, my administration will create 500,000 new homeowners,” said President Kenyatta during his inauguration on November 28, 2017. The policy will lower the country’s housing deficit from the current two million to 1.5 million. In short, the government must facilitate the construction of 100,000 low-cost houses annually starting this year. Developers see that declaration as a windfall since the government will be obligated to put in requisite infrastructure to make the housing dream a reality. In his speech, Kenyatta briefly touched on measures the government would take toward the realisation of his promise. These include the injection of ...
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