The cost of building went up by 2.71 percent year-on-year in the third quarter of 2023 driven by a rise in the cost of cement, steel, fuel and other key inputs.
Data from the Kenya National Bureau of Statistics (KNBS) shows the Construction Cost Index rose to 116.45 in the three months to September, up from 113.38 in the same period last year. It is the fastest annual growth since the fourth quarter of 2022 when the index rose by 7.1 percent, the third fastest rate on record.
During the period, almost all construction material indices increased except for paints, sanitary fittings, water fittings, water waste appliances, and electrical fittings which dropped by 0.7 percent, one percent, 0.2 percent, 2 percent, and 0.8 percent.
The index of cement steel and reinforcement bars went up by 0.5 per cent and 1.6 percent, respectively, from the second quarter to the third quarter of 2023. The index of hardcore, dense bitumen macadam, metal doors, and windows all went up by 1.6 percent.
Meanwhile, the transport and fuels index, increased by three percent in the same period under review.
“The construction labour wages index increased slightly by one percent from 108.44 to 109.55 in Q3 2023. The equipment index also increased from 106.26 in Q2 to 107.08 in Q3 2023,” said the KNBS.
The rapid depreciation of the Kenya shilling against the US dollar has played a pivotal role in the cost of construction inputs during the period. Kenya imports most of its construction materials such as steel, cement clinker, fuel, machinery, and equipment, with the weakening shilling making the cost of these imports shoot up.
This has slowed down the construction sector, which recorded a subdued growth of 2.6 percent in the second quarter of 2023 compared to 4.5 percent growth in the second quarter of 2022.
The rising construction costs are a blow to President William Ruto’s plan to spur the construction — mostly by the private sector — of 250,000 affordable housing units per year.
Dr Ruto introduced the housing levy charged at 1.5 percent of workers’ gross pay, which is then matched by their employers, to fund the affordable housing programme.
The National Housing Corporation is the lead implementer of the government’s housing programme under the State Department for Housing and Urban Development and is among the developers of the low-cost units.
A State Department report shows that the low-cost homes will cost between Sh840,000 and Sh5.76 million and will comprise studio apartments, one, two, and three-room units.