Kenya’s real estate market ranks low in transparency

• The brisk growth in the market for nearly a decade notwithstanding, the dearth of information is likely to limit the country’s ability to attract foreign direct investment.
• The 2012 Global Real Estate Transparency Index by London-based financial consultancy Jones Lang LaSalle has ranked Kenya for the first time, but in the “semi-transparent” category. Kenya was ranked 65 out of 97 countries in transparency.
• The findings indicate that Kenya is showing signs of transparency and is on the continent placed behind Mauritius at position 59, Botswana (56) and South Africa, the only African country to be placed in the “Transparent” category.
• Countries were grouped into highly transparent, transparent, semi-transparent, low transparency and opaque.
• The property crisis-hit United States emerged top in the “highly transparent” category while Sudan was last in the opaque category.

Kenya’s real estate sector has scored poorly in a global property markets transparency rankings over unreliable data despite emerging fourth best in Africa.

The brisk growth in the market for nearly a decade notwithstanding, the dearth of information is likely to limit the country’s ability to attract foreign direct investment.

The 2012 Global Real Estate Transparency Index by London-based financial consultancy Jones Lang LaSalle has ranked Kenya for the first time, but in the “semi-transparent” category. Kenya was ranked 65 out of 97 countries in transparency.

“With Nairobi as one of East Africa’s most important business hubs, Kenya has historically been one of sub-Sahara’s more stable countries, and is classified as semi-transparent,” says the report.

The findings indicate that Kenya is showing signs of transparency and is on the continent placed behind Mauritius at position 59, Botswana (56) and South Africa, the only African country to be placed in the “Transparent” category.

Countries were grouped into highly transparent, transparent, semi-transparent, low transparency and opaque.

The property crisis-hit United States emerged top in the “highly transparent” category while Sudan was last in the opaque category.

The report says that while Kenya is not doing well on the global scale it fares better than its regional peers.

“With a more solid legal and contractual framework and a higher degree of real estate market maturity than many of its West African counterparts, Kenya is comparatively transparent on a regional level,” says the report.

Inadequate data on real estate market, which blocks potential foreign direct investments over opaque valuations, contributed to Kenya’s low score in the global ranking.

“Without historical returns indices, prospective international investors are flying blind, guessing about market risk-return profiles,” says the report. “This makes them much less likely to invest, raising the cost of their capital.”

In the research, office space, which accounts for half of all real estate space, was a major determinant as it yields the best data. Others were the retail, industrial, hotels and residential sectors.

Property managers and real estate consultants have in the past complained about poor market data and inaccurate valuations.

Serious problem

Mr Mwenda Makathimo, the executive director of Land Development and Governance Institute, said that the lack of data on the real estate sector is a “serious problem” arising from a number of causes.