Kenya's extended presidential polls expected to hamper real estate growth

Growth in Kenya's real estate sector is likely to be affected by the extended electioneering period of the presidential polls this year, a Nairobi-based investment firm said on Monday.

Cytonn Investments Head of Private Equity Real Estate Shiv Arora told a media briefing that following the nullification of the Aug. 8 presidential polls and an ordered repeat, the real estate growth will slow down as investors take a wait-and-see attitude.

"We expect the real estate sector to pick up in early 2018 after the end of the presidential polls," Arora said.

He noted that the sector is also being affected by the banking amendment act that was operationalized in 2016 that put a cap on interest rates of bank loans as well as political uncertainty.

According to the investment firm, there has been increased expenditure in the economy due to electioneering.

"This has led to a diversion of money away from purchasing of real estate to funding political campaign activity," Arora said.

He noted that over 95 percent of all real estate finance comes from commercial banks with the rest from alternative sources of finance.

"However banks have been reluctant to lend to the real estate sector in the current political campaign season due to uncertainty associated with the presidential polls," he added.

Arora noted that historically, the real estate sector has been the best-performing asset class in Kenya.

"On average the returns have varied between 20 and 25 percent annually, while in the developed nations the returns are less than 5 percent annually," he added.

source: Xinhua