Performance of the Real Estate Sector in Kenya

By Soko Directory Team / February 1, 2016



Returns

The real estate sector contributes 9% of Kenya’s GDP, according to a Real Estate Report released by Cytonn Investments today.

According to the report, in Q3/2015, the construction and real estate industry had the greatest growth at 14.1%, compared to 10.1% in financial services and 7.1% growth in agriculture.

In Kenya, the Real estate sector has consistently outperformed other asset classes in the last five years, generating returns of between 25% and 30% and making it the most lucrative business to venture in with zero losses.

Residential units in Kenya generate an average rental yield of 5%, while commercial space generates an average yield of over 9%. The report indicates that the total Return, including rental yield and appreciation, is in the region of 28% High Returns Recent Developments Market Outlook.

The real estate sector in and which was previously dominated by individual developers has now seen entry of more institutional developers such as Saccos, private equity firms and foreign institutions in major towns around the country.

According to the Cytonn Report, the development of REITS in the capital markets, as a way to raise funding and exit real estate developments, is likely to attract more institutional investors. The industry however continues face challenges such as unfavorable interest rate environment, something that dominated the industry the better part of the year 2015.

Rapid population growth of 2.4% per annum is creating increased demand for housing, as families grow and consumer needs change to reflect independent living. The demand has also been aided by the high urbanization rate of 4.4% per annum in the Nairobi area and the metropolis.

The ‘new middle class’ have created a huge opportunity for integrated housing developments such as mixed used developments and master planned communities. Improved infrastructural developments have opened up new development areas in areas such as Athi River, Mlolongo and Ruaka. These include improved roads, expanding airports, and the Standard Gauge Railway, electrification, ICT and telecommunication systems.

REITS development is set to make it easy to access capital to develop, as well as facilitate exit of developments to the public markets, which in turn increases the transparency of the sector. Pension schemes and insurance companies now allocate more than 16% of their portfolio to real estate, a trend set to increase with more trustee and investor education in the sector. Kenya has enjoyed improved political stability creating a suitable environment for local and foreign direct investment

Owing to the high returns in the real estate sector, such investments have been mainly focused on real estate developments.


Article by Juma Fred.

 



About Soko Directory Team

Soko Directory is a Financial and Markets digital portal that tracks brands, listed firms on the NSE, SMEs and trend setters in the markets eco-system.Find us on Facebook: facebook.com/SokoDirectory and on Twitter: twitter.com/SokoDirectory

View other posts by Soko Directory Team


More Articles From This Author








Other Related Articles










SOKO DIRECTORY & FINANCIAL GUIDE

ARCHIVES

2019
  • January 2019 (256)
  • February 2019 (216)
  • March 2019 (216)
  • 2018
  • January 2018 (291)
  • February 2018 (220)
  • March 2018 (279)
  • April 2018 (226)
  • May 2018 (240)
  • June 2018 (178)
  • July 2018 (257)
  • August 2018 (250)
  • September 2018 (256)
  • October 2018 (287)
  • November 2018 (286)
  • December 2018 (187)
  • 2017
  • January 2017 (183)
  • February 2017 (195)
  • March 2017 (207)
  • April 2017 (104)
  • May 2017 (169)
  • June 2017 (206)
  • July 2017 (190)
  • August 2017 (196)
  • September 2017 (186)
  • October 2017 (235)
  • November 2017 (253)
  • December 2017 (266)
  • 2016
  • January 2016 (167)
  • February 2016 (165)
  • March 2016 (190)
  • April 2016 (143)
  • May 2016 (246)
  • June 2016 (183)
  • July 2016 (271)
  • August 2016 (250)
  • September 2016 (234)
  • October 2016 (191)
  • November 2016 (243)
  • December 2016 (153)
  • 2015
  • January 2015 (1)
  • February 2015 (4)
  • March 2015 (166)
  • April 2015 (109)
  • May 2015 (117)
  • June 2015 (121)
  • July 2015 (150)
  • August 2015 (157)
  • September 2015 (189)
  • October 2015 (171)
  • November 2015 (174)
  • December 2015 (208)
  • 2014
  • March 2014 (2)
  • 2013
  • March 2013 (10)
  • June 2013 (1)
  • 2012
  • March 2012 (7)
  • April 2012 (15)
  • May 2012 (1)
  • July 2012 (1)
  • August 2012 (4)
  • October 2012 (2)
  • November 2012 (2)
  • December 2012 (1)
  • 2011
    2010
    2009
    2008
    2007
    2006
    2005
    2004
    2003
    2002
    2001
    2000
    1999
    1998
    1997
    1996
    1995
    1994
    1993
    1992
    1991
    1990
    1989
    1988
    1987
    1986
    1985
    1984
    1983
    1982
    1981
    1980
    1979
    1978
    1977
    1976
    1975
    1974
    1973
    1972
    1971
    1970
    1969
    1968
    1967
    1966
    1965
    1964
    1963
    1962
    1961
    1960
    1959
    1958
    1957
    1956
    1955
    1954
    1953
    1952
    1951
    1950