Real estate upbeat as City Hall building permits hit Sh18bn

Money Markets

A building under construction on Kenyatta Avenue in Nakuru. The number of developers seeking building permits has increased. PHOTO | FILE 

By GEOFFREY IRUNGU, girungu@ke.nationmedia.com

In Summary

• Latest data from the county government shows the value rose to Sh18.6 billion in May, the highest so far this year. Compared to April, the value was higher by more than Sh1.3 billion.

The construction industry is looking up with the value of buildings approved by the Nairobi City County rising to the highest level in May compared to the previous four months.

Latest data from the county government shows the value rose to Sh18.6 billion in May, the highest so far this year. Compared to April, the value was higher by more than Sh1.3 billion.

The approved construction includes both residential and commercial units, according to data published by the Kenya National Bureau of Statistics (KNBS).

The rising activity in the real estate sector comes amidst the increase in the Construction Cost Index which stood at 234.9 in May, the highest this year. The index is provided by the Nairobi City County government.

Professionals in the property sector say the growth is real on the ground given the fact that housing remains an attractive investment.

“There has been a gradual increase in activity in the past few months. Real estate sector remains an attractive investment choice,” says Emma Miloyo, an architect at DesignSource.

Ms Miloyo, who is also the vice-president of the Association of Architects of Kenya (AAK), said that consultants in the industry are chalking up good business.

“The law requires that all building plans submitted for approval must be prepared by duly registered consultants hence such an increase would in number and value of [buildings] applications would be a result of more work done by professionals,” said Ms Miloyo.

At the beginning of the year, the KNBS data showed that approved buildings plans were valued Sh12.7 billion, but they have since risen steadily every month.

The biggest value of the construction was in residential housing where the total worth in May was Sh11.6 billion. The non-residential construction – which is mainly for commercial purposes – amounted to Sh7.0 billion.

The total value of the buildings constructed in May was also higher than in the same month last year when it stood at Sh18.3 billion.

Players in the sector have stressed that mortgages from financial institutions only contribute a small portion to the growth of the sector as most of the buildings are put up using cash. The source of huge outlays of cash however remains unknown.

“Uptake of mortgage in Kenya is still very low contributing only a small percentage by way of new investments,” said Ms Miloyo. She added the total number of mortgage accounts and total value of mortgage assets cannot produce such a significant increase in the value of buildings.

She further noted that whereas professionals continue to prepare the plans for construction purposes, there are still a good number of buildings that have not gone through the right process.

The mega infrastructure projects such as the railways and the Lamu port are expected to open up new opportunities for construction.Things will get better, the mega infrastructure projects such as the Lamu port and standard gauge railway will open new opportunities for development of new building projects. There has been consistent growth in the industry and the trend is likely to continue in the foreseeable future,” said Ms Miloyo.