Real estate investors are now the biggest loan defaulters, signalling the more than decade-long property boom is easing.
Central
Bank of Kenya (CBK) governor Patrick Njoroge said, yesterday real
estate contributed the most to last month’s increase in the stock of
non-performing loans (NPLs) along with trade and manufacturing firms.
“The
ratio of the non-performing loans to gross loans increased to 12.4 per
cent in April from 11.4 per cent in February 2018 largely due to
increased NPLs in the real estate, trade and manufacturing sectors,”
said Dr Njoroge at a press briefing.
“A significant
share of the NPLs was due to delayed payments to suppliers by national
and county governments, and the private sector,” he added.
Dr Njoroge cited slow rate of uptake of newly built malls by
tenants saying this had compounded the repayment challenge for
investors.
Housing has been one of Kenya’s fastest
growing sectors over the last decade, with returns from real estate
outpacing equities and government securities. This attracted high-net
worth investors into the sector.
A dip in prices and
the slow uptake of newly-built units have raised fears of renewed
pressure on developers, who borrowed to fund for-sale projects as
obligations mature.
A slow down on growth of private
sector credit is also hurting real estate, which heavily relies on bank
loans for unit purchases.
Private sector credit grew
just 2.8 per cent in the year to April, from 2.1 per cent in the 12
months to February. This is below the central bank’s target rate of
12-15 per cent.
Some experts have warned that the retail property market is facing an oversupply.
“Robust
retail real estate build of the last decade means that for the
foreseeable future Nairobi is probably oversupplied with stock,” said
Gerhard Zeelie, head of real estate finance, Africa Region, at Standard
Bank.
In 2017, the sector continued to record a slowdown in activity as a result of a challenging economic environment.
Kenya
National Bureau of Statistics data shows the value of building plans
approved by Nairobi City County between January and July 2017 fell by
18.4 per cent to Sh149.5 billion from Sh183.2 billion between January
and July 2016.
“We attribute the decline mainly to the
wait and see attitude adopted by investors during the electioneering
period, and reduced credit to the private sector by banks as a result of
the enactment of the Banking Amendment Act,” said Cytonn.
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