The real estate sector positively contributed to Kenya’s Gross Domestic Product (GDP) in the year 2016. Experts and investors in the sector say this contribution has risen to 8.8 percent from 7.2 percent the previous year due to business friendly policies by the government. [Check out the five hottest areas for real estate at the end of article]
A report by Cytonn Investments, released on 12th June reveals that real estate has consistently outperformed other asset classes in the last five years.
Senior Manager of Regional Markets, Johnson Denge, said the sector has been generating returns of over 25% to an average of 12% per year in the traditional asset classes. He further said real estate and land sectors are expected to continue growing on the backdrop of developments such as lower financing costs and the entry of institutional developers to the market.
A Cytonn research analyst, Juster Kendi, noted that growing population, infrastructure and legal reforms in Kenya are some of the factors driving land performance in the country. “Kenya’s population growth rate at 2.6 percent per annum, rapid urbanization at 4.4 percent per annum and growing middle class have created demand for development land,” said Kendi.
Ms Kendi added that the rising middle-class has increased purchasing power, leading to increased demand for housing units and development land Infrastructure.
“Infrastructural development such as roads, power distribution especially at county level and revision of zoning regulations has led to opening up of new areas for development such as along the Northern Bypass, Eastern and upcoming Western Bypass leading to increased demand,” said Kendi.
See Also: Don’t be conned: Follow these simple steps when buying land
The Head of Private Equity Real Estate, Shiv Arora, noted that the key drivers for the increment in land prices have mainly been population growth, rapid urbanisation, improved infrastructure opening up areas for development, legal reforms easing land transactions and economic growth increasing disposable income.
He noted that based on individual market performance, Athi River, Ongata Rongai, Syokimau-Mlolongo, Limuru and Dagoretti recorded the highest growth rates. “This is mainly characterized by higher infrastructure provision and relaxed zoning regulations in these regions than in the other satellite towns,” said Arora.
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