Larger property developers are set for a credit boost as banks shun loaning smaller competition deemed riskier following new interest rate caps.
Sakina Hassanali, the head of research and marketing at property developers HassConsult says the larger, more established developers are seeing more credit lines open up than was previously the case, increasing the capital available for new projects.
Ms Hassanali said tougher credit conditions for the sector will streamline the market, which has largely operated without much regulation.
“Getting credit is more stringent, so what you have is that only the very established developers are getting access to credit lines. In a way this is not bad because it promotes a more formal developer market and less risk to the end buyer,” said Ms Hassanali on Monday when releasing the third quarter Hass property index.
“The more robust property markets around the world had some streamlining when they started to grow, resulting in fewer small developers. That way, the customer is more assured of what they are getting… we have seen a lot of property buyers subjected to some poor practices such as bad building quality and delayed construction times.”
On the other hand, she added, credit will become more affordable for home buyers, thus providing some much-needed liquidity in the housing market.
The property sector has attracted a lot of interest from developers in recent years, pulled in by the high returns on offer as both land and house prices skyrocketed.
The growth of the real estate sector has, however, slowed down this year with the Kenya National Bureau of Statistics reporting that during the second quarter the construction sector recorded slowed growth of 8.2 per cent compared to 11.2 per cent realised in the second quarter of 2015.
The Central Bank of Kenya has recently raised concerns over slowing credit growth in the private sector.