Kenya: Investors Cautious on Kenya's Public Housing

Apr 16, 2019 | The EastAfrican; All Africa

Private developers in Kenya are cautious about investing in the government's ambitious public housing programme under the Big Four Agenda, citing low returns.

They are arguing that the government's plan of providing units whose cost ranges from $8,000 to $30,000 does not make economic sense because they are operating in a market where the capital-intensive real estate sector is largely financed by commercial banks--whose interest rates range from 14 per cent to 19 per cent per annum--making it a risky venture that a majority of developers are not willing to undertake.

Developers want to see at least a 20 per cent profit margin on development, a yield that is impossible to achieve from the low-end housing market.

"Looking at innovative ways of delivering affordable housing is crucial, because materials account for 70 per cent of construction costs," said Emma Miloyo, outgoing president of the Architectural Association of Kenya.

To ensure that private developers buy into the idea, the government has offered free land and established a mortgage refinance firm to provide medium to long-term funding to primary mortgage lenders.

However, this has been faulted by private developers, who are also concerned by the failure of government policy to address the regulatory hindrances--such as the lack of a mechanism to transfer public land to a special purpose vehicle (SPV) to facilitate access to private capital through the use of the land as security. Read more from All Africa.

Source: All Africa