Real estate sector cools down ahead of August elections

The looming elections have depressed the real estate sector with investors adopting a wait-and-see attitude after experiencing flare-ups that disrupted businesses in 2007.

A survey by integrated real estate services provider Ark Consultants shows that most local and foreign investors are waiting for the August 8 General Election to pass before making a decision on whether to invest.

“Our investment cycles tend to start after a general election and end with the next general elections. It’s an election year and the slowdown in uptake, drop in prices and the increasing number of vacancies are tell tale signs that the market is adopting a wait and see attitude,” says the survey report.

The company’s commercial services director, Reginald Okumu, said the challenges for the residential and commercial sub-sector are further compounded by the government’s move to introduce Capital Gains Tax (CGT) on rental income.

“While the housing deficit has elicited an insatiable demand among investors, CGT demands have seen many plot owners hike rents thereby forcing tenants to stay away depressing growth in the two sub-sectors,” he said.

Mr Okumu added that capping of interest rates had also adversely affected banks’ appetite to lend money to mortgage applicants since it was no longer attractive to dish out loans at a maximum of 14.5 per cent.

While investors see lush opportunities in warehousing and logistics, a lot activity is expected in the sub-sector once the Nairobi-Mombasa standard gauge railway is commissioned.

The study adds that towns experiencing a population boom will also see an upsurge of warehouse developments by companies seeking ways to mass distribute processed products.

Devolution, it says, has reduced demand for space in major towns that served as provincial headquarters leaving many government offices unoccupied.