The real estate and construction sector has not been spared the economic disruption unleashed by the Covid-19.
After recording slow growth in 2019, Kenya’s real estate sector was poised for accelerated recovery in 2020, with rising demand for housing and the State-backed affordable housing programme targeting 500,000 units on track.
However, the pandemic upstaged the much-anticipated growth, forcing developers to scale down projects.
Public health restrictions, including lockdown to contain the pandemic, also stalled the construction sector.
A consulting firm Deloitte report in May shows that supply disruptions, reduced demand, financial uncertainty and decline in project financing, are some of the challenges facing the real estate sector due to the coronavirus.
Delay in official approvals is another hurdle as operations in public offices have slowed down. The closure of land registries from February to May also affected property transactions.
As the country weighs options for re-opening the economy, it is time to re-think the existing real estate model and come up with innovative approaches to construction and project financing. Fortunately, the government has rolled out stimulus interventions, some of them aimed at boosting the housing sector.
Notably, an amendment to the Retirement Benefits Act allows the use of pension savings to purchase of a residential home or to secure a mortgage. This will unlock billions of shillings in pension savings for home acquisition.
Still, there is a need for innovation in construction technology. This not only improves the quality of houses but also makes them affordable, durable and environment-friendly.
The use of pre-cast technology is catching on in the market as it offers a cheaper and flexible construction method. Kenyans are cost-conscious and therefore, amenable to innovative products that help them save money. Other innovative technologies include the use of reinforced concrete that saves 30-40 per cent of the cost. Reinforced concrete is sturdy, neat and faster in the construction of houses.
Besides, the use of locally available materials such as soil instead of expanded polystyrene in rural areas saves 40-50 per cent of costs compared to traditional brick-and-mortar method. The homes constructed using this method are also strong and durable.
Such technologies can deliver thousands of decent homes for the lower-income market.
Mortgage uptake in Kenya is low as most products are unaffordable to the majority of Kenyans. However, an expanding middle class and rising disposable incomes have seen the number of mortgages increase.
Even when the Covid-19 crisis abates, the real estate sector will have to adjust to the new normal. Moreover, the real estate sector would play a leading role in economic recovery and the creation of jobs and business opportunities.
This is the right time to craft an innovative approach to housing. The government and the private sector should collaborate to deliver affordable housing to Kenyans.