Nairobians building less houses as credit crunch bites
Nairobi private construction last year registered a 12.8 per cent fall, with Sh210 billion projects approved compared to Sh240.8 billion worth of projects in 2017.
This is much lower than the five-year high registered in 2016 when investors injected Sh308.4 billion into newly approved projects. Year 2014 had seen Sh205.4 billion projects and 2015 saw Sh215.2 billion worth receive a nod.
The 2018 slump, partly attributed to regulatory delays in approving projects, appears to have been hit hard by diminishing access to credit from local financiers who have remained apprehensive since 2017 when interest rate capping law took effect.
The Central Bank of Kenya (CBK) latest quarterly report indicates real estate players were the biggest loan defaulters at Sh44.4 billion, a 15.8 percent or Sh6.1 billion spike outpacing non-performing loans by manufacturers (11.7 per cent) and traders (7.3 per cent).
In 2018, the real estate sector received Sh113.7 billion loans from commercial banks despite an evident appetite for residential homes that has attracted new players among them saccos and standalone home developers as well as the government’s yet-to-takeoff Sh2 trillion Affordable Housing Programme.
The slump adversely affected cement consumption that grew by a paltry 1.6 percent to 5.95 million tonnes making cement companies to reduce production by 2.6 percent to 6.1 million tonnes for the second year in a row, with regional exports dwindling by a significant 62.8 percent to stand at 43,500 tonnes.
According to the 2019 Economic Survey, the sector could soon experience a major jolt with the government’s planned injection of Sh29 billion in public housing projects this year, a 57.3 percent rise from last year’s Sh18.4 billion.
The Affordable Housing Programme (AHP) is among President Uhuru Kenyatta’s legacy project where he has pledged to deliver 500,000 housing units by 2022 for low and low-middle income earners mainly working in urban areas.
State Department of Housing principal secretary Charles Hinga says the AHP projects could consume an estimated 80 million bags of cement in the next three years.