How to Invest in Kenya’s Thriving Real Estate Market in 2024

Investing in Kenya’s Real Estate Market like a Pro

Kenya is one of the most attractive destinations for real estate investment in Africa and the world. The country has been experiencing impressive economic growth, a rapidly expanding middle class, and a favourable investment climate. These factors have contributed to the boom of the real estate sector, which has been offering high returns and opportunities for investors.

But how can you invest in Kenya’s thriving real estate market in 2023? What are the trends, challenges, and strategies that you need to know? In this blog post, we will explore these questions and provide you with some useful tips and insights on how to succeed in Kenya’s real estate market in 2023.

Why Invest in Kenya’s Real Estate Market in 2023?

Before we dive into the details of how to invest in Kenya’s real estate market in 2023, let us first understand why you should consider investing in this market in the first place. Here are some of the reasons why Kenya’s real estate market is a lucrative and attractive option for investors in 2023:

• Unprecedented Growth: Kenya’s real estate sector has experienced unprecedented growth, surpassing other industries like manufacturing, services, and agriculture. According to the Kenya National Bureau of Statistics, the real estate sector grew by 11.8% in 2022, compared to 4.9% for the overall economy. Real estate has become the top pick for investors surpassing once-favored investments like equities. Based on findings, about 40% of wealthy Kenyan investors have allocated their portfolios to real estate and regard private rental properties as a long-term defence against inflation and currency downfall.
• Relaxed Regulatory Environment: Fueled by a relaxed regulatory environment, building approvals in Nairobi City County have skyrocketed which has directly affected the real estate market’s growth urging real estate investors to inject over Sh162.5 billion in investment into Kenya’s capital city. Ashitiva Advocates LLP’s Head of Real Estate, Banking and Financial Services states that while the government’s policies are heading in the right direction, there’s a pressing need to provide a better regulatory framework for the industry. There are some positive remedies in sight; however, concerns arise towards new policies, such as the Finance Act of 2023, that limit incentives and incorporate new levies to widen the tax infrastructure. These policies have the potential to undermine the progress made within the industry.
• Infrastructure Development: The expansion of infrastructure has played a significant role in enhancing the appeal of real estate for developers and investors, thereby stimulating growth in the sector. According to the Economic Survey 2023, the stretch of national roads covered in bitumen increased from 18,700 kilometres in 2021 to 19,100 kilometres in 2022. Moreover, it is projected that the government’s approved expenditure on housing infrastructure will rise to Sh19 billion from Sh14.1 billion in 2021/22, while the allocation for road development is expected to reach Sh191.4 billion during the same period. The surge in land prices in Athi River during the first quarter of 2023 was triggered by the proposal to extend the Standard Gauge Railway to the Export Processing Zone.
• Demographic Dividend: Kenya’s growing real estate industry owes a great amount of its success to the country’s booming young population. Currently comprising about 80% of Kenya’s total inhabitants, the youth may not boast the massive financial capacity of older generations when it comes to real estate, but their creative investment strategies still power the growth of the industry. Chairman Ondwari enthusiastically heralds this fact as evidence for the real estate boom. The youthful populace may choose to invest in urban apartments through the affordable housing program, particularly in places like Pangani. Their intention is not to live in these apartments themselves, but rather to generate additional rental income by renting them out, possibly through platforms like Airbnb.
• Diaspora Remittances: Since 2017, there has been a significant increase in diaspora remittances to Kenya, as revealed by a recent survey conducted by the Central Bank of Kenya. The remittances have grown by over 200%, reaching Sh453.6 billion in 2022 from Sh215.4 billion. It is interesting to note that more than half of the remitted money is utilized for buying land, repaying mortgages, or developing properties. Naftali Oswere, the founder of Bantu Homes, who has previously lived and worked abroad, confirms this trend. He explains that for many individuals residing overseas, investing in real estate is the most logical way to utilize their funds in their home country. Oswere attributes this inclination to factors such as a strong dollar and favourable policies that facilitate money transfers for real estate investments for Kenyans in the diaspora.

These are some of the reasons why Kenya’s real estate market in 2023 is a promising and profitable option for investors. However, investing in this market is not without its challenges and risks, which we will discuss in the next section.

Trends in Kenya’s Real Estate Market in 2023

As we head into 2024, several trends will shape the real estate market in Kenya. These trends include:

• Continued Growth of the Middle-Class Population: Kenya’s middle class has been growing steadily in recent years, and this trend is expected to continue in 2024. The rise of the middle class has led to increased demand for quality housing and commercial properties, as well as an increase in consumer spending power. Investors who can cater to the needs of the middle class are likely to see significant returns on their investments.
• Increased Investment in Infrastructure: The Kenyan government has been investing heavily in infrastructure development in recent years, including road networks, rail, and ports. This investment is expected to continue in 2024, driving demand for real estate in areas with improved connectivity. Investors who can identify and capitalize on these areas are likely to see strong returns.
• Rise of Co-working and Flexible Office Spaces: With the growth of startups and entrepreneurship in Kenya, there is likely to be increased demand for co-working spaces and flexible office solutions. Investors who can provide these solutions are likely to see strong demand and good returns.
• Increased Use of Technology in Real Estate: Technology is increasingly being used in the Kenyan real estate market, with online real estate platforms and digital solutions for property management, valuation, and sales gaining traction. Investors who can leverage these technologies to streamline their operations and improve their services are likely to see strong demand and returns.
• Focus on Sustainability: As climate change and environmental concerns gain prominence, investors may want to consider sustainable building practices and renewable energy solutions in their real estate projects. Properties that are eco-friendly and energy-efficient are likely to be in high demand in the coming years.
• Demand for Affordable Housing: There is a growing demand for affordable housing in Kenya, which presents an opportunity for investors who can provide low-cost housing solutions. Investors who can cater to this segment of the market are likely to see strong returns and contribute to the development of the country’s housing sector.
• Increased Interest in Commercial Real Estate: With the growth of the Kenyan economy, there is likely to be increased demand for commercial real estate, including office, retail, and industrial spaces. Investors who can identify and capitalize on these opportunities are likely to see strong returns.

Challenges in Kenya’s Real Estate Market in 2023

Despite the promising prospects, Kenya’s real estate market also faces some challenges that investors need to be aware of and overcome. These challenges include:

• Property Prices: Property prices in Kenya can be quite steep, particularly in desirable locations. Investors need to do thorough research and analysis to find the best deals and negotiate the best prices.
• Access to Financing and Capital: Access to financing and capital can be a challenge for investors, especially if they are not Kenyan citizens or residents. Investors need to explore various sources of funding, such as banks, private equity firms, or crowdfunding platforms, and meet the requirements and criteria for obtaining loans or equity.
• Property Management and Maintenance: Property management and maintenance can be a challenge for investors, especially if they are not based in Kenya or have multiple properties. Investors need to find reliable and professional property managers who can handle the day-to-day operations, maintenance, and repairs of their properties, as well as collect rents and deal with tenants.
• Tenant Turnover and Vacancies: Tenant turnover and vacancies can be a challenge for investors, as they can affect the cash flow and profitability of their properties. Investors need to find ways to attract and retain quality tenants, such as offering competitive rents, providing excellent services and amenities, and marketing their properties effectively.
• Legal and Regulatory Complexity: Legal and regulatory complexity can be a challenge for investors, as they need to comply with various laws and regulations governing the real estate sector in Kenya. Investors need to be familiar with the legal and regulatory framework, such as land ownership, property registration, taxation, zoning, and environmental issues, and seek professional advice from lawyers, accountants, and registered real estate consultants when necessary.
• Competition and Property Pricing: Competition and property pricing can be a challenge for investors, as they need to compete with other investors and developers in the market. Investors need to be aware of the market trends, supply and demand, and pricing strategies, and position their properties accordingly to gain a competitive edge.
• Market Oversupply: Market oversupply can be a challenge for investors, as it can lead to reduced demand and lower prices for their properties. Investors need to be cautious and selective when choosing their projects, and avoid investing in areas or segments that are already saturated or have low potential.

Strategies for Success in Kenya’s Real Estate Market in 2024

To overcome the challenges and take advantage of the opportunities in Kenya’s real estate market in 2024, investors need to adopt some strategies for success. These strategies include:

• Research and Analysis: Research and analysis are essential for investors, as they help them to identify the best locations, projects, and deals in the market. Investors need to conduct market research, feasibility studies, due diligence, and risk assessment before making any investment decisions.
• Network and Partnership: Networks and partnerships are vital for investors, as they help them to access information, resources, and opportunities in the market. Investors need to build and maintain relationships with various stakeholders, such as real estate agents, brokers, developers, contractors, property managers, lawyers, accountants, consultants, and other investors, and seek partnerships and collaborations when possible.
• Innovation and Differentiation: Innovation and differentiation are crucial for investors, as they help them to stand out from the crowd and attract more customers. Investors need to be innovative and creative in their projects and offer unique and value-added features and services that differentiate them from their competitors.
• Adaptability and Flexibility: Adaptability and flexibility are important for investors, as they help them to cope with the changing market conditions and customer preferences. Investors need to be adaptable and flexible in their strategies and be ready to adjust and modify their plans and actions according to market feedback and trends.

Conclusion

Kenya’s real estate market in 2024 offers a lot of potential and opportunities for investors who are looking for high returns and growth. However, investors also need to be aware of the challenges and risks that they may face, and adopt some strategies for success. By doing so, you can enjoy the benefits of investing in Kenya’s thriving real estate market in 2024 and beyond.