Real estate rebounds after election-period slowdown

The value of residential building plans approved by the City County of Nairobi in the first half of the year went up by Sh21.7 billion, underlining resurgence of the real estate sector after the lull caused by election jitters.

Data from the City Hall shows that it approved construction of buildings worth Sh96.9 billion in the six months to June compared to Sh75.5 billion in the first half of last year.

The increase was wholly driven by residential projects that exceeded the value of commercial plans to hit Sh50.9 billion.

“After waiting for the polls and they were successful those in the wait- and see- mode were able to release their funds into projects,” said economist Dr X.N Iraki.

The rise was also attributed to increased compliance with the Building Code, which requires the local authority to approve all construction plans within its jurisdiction.

“Following the collapse of buildings there has been insistence on compliance and so more people are submitting their plans for approval,” said the chairman of the National Construction Authority, Steven Oundo.

Real estate projects slowed down last year following fears of a repeat of the post-election violence witnessed in 2008 that caused deaths and huge property losses. High financing costs also saw the market cool down as potential buyers kept off due to the high mortgage instalments.

Central bank has in the last twelve months cut its indicative lending rate by more than half as it seeks to revive economic growth after stifling the economy off cash to curtail inflation and support the shilling.

Mr Oundo said the increase in approval was a sign of growing economy as investors would release cash during implementation of the projects creating employment especially for in the informal sector.

Companies have also entered into financing agreement with lending institutions as they seek to attract and tie down their productive staff members improving uptake of residential projects. Improved infrastructure has also opened new areas for residential investment.

“We have people in the diaspora putting money into the sector and the improved infrastructure has opened up new areas that are seeing this growth,” said the managing director of Citiscape Valuers and estate agents, Nelly Mbugua.

Commercial projects have usually dominated Nairobi plans due to the capital city being a business hub not only for the country but also the East African region.

Commercial projects, though few, are capital intensive pushing the value of approved non-residential projects up. Garden City Mall, a shopping complex along Thika Superhighway is billed to be constructed at a cost of Sh12.6 billion.