More private investors have cut back on new housing projects amid growing uncertainty about the disruptions of the State’s ramped-up affordable housing programmes (AHPs), high material costs, and market shifts toward mixed-use units.
The value of building approvals in Nairobi, for example, dropped by 24.5 percent during the first 11 months of 2025 compared to a similar period the previous year, highlighting a sustained slowdown in private construction activity.
Data from the Kenya National Bureau of Statistics (KNBS) shows that Nairobi City County approved building plans valued Sh149.2 billion between January and November 2025, down from Sh197.5 billion over the same period in 2024.
The 24.5 percent year-on-year decline highlights sustained caution among private developers as government-backed housing projects expand supply, particularly in residential segments that dominate Nairobi’s construction market.
Last November alone, the value of approvals in the city fell 61.3 percent to Sh5.5 billion, down from Sh14.2 billion in October, driven largely by a Sh5.9 billion reduction in residential approvals.
“The total value of building plans approved by Nairobi City County declined sharply from Sh14.2 billion in October 2025 to Sh5.5 billion in November 2025. This contraction was driven by reductions in both residential approvals, which fell from Sh11.1 billion to Sh5.2 billion, and non-residential approvals, which declined from Sh3.1 billion to Sh0.3 billion,” KNBS said.
“Cumulatively, approvals during the first 11 months of 2025 amounted to Sh149.2 billion, representing a 24.5 percent decrease from Sh197.5 billion recorded over the same period in 2024,” it added.
The cumulative decline reflects reduced appetite for new private housing projects as thousands of government-backed affordable housing units enter the market across Nairobi.
The government says more than 150,000 affordable housing units are currently under construction nationwide, with Nairobi leading in the share of ongoing projects.
The scale of public housing construction has altered market dynamics, prompting private developers to slow approvals amid concerns over pricing power and absorption capacity.
Rising construction costs have further compounded the slowdown, increasing project budgets and squeezing margins for developers competing in an increasingly crowded housing market.
Industry data shows construction costs rose by up to 16 percent in the 10 months to October 2025, driven by higher fuel prices, inflation, and rising material costs.
A recent update by the Architectural Association of Kenya indicates that the cost of building a standard bungalow, for instance, increased to Sh54,730 per square metre, while maisonettes rose to Sh59,868 per square metre, both having risen 12 percent during the period.
Separately, KNBS data shows that construction input prices rose at the fastest pace in nearly two years during the quarter to September last year, adding pressure to ongoing and planned developments.
The Construction Input Price Index increased 1.27 percent from 119.75 points in July to 121.27 points by the close of September 2025, marking the sharpest quarterly rise since December 2023.
The increase was driven mainly by higher prices of steel, reinforced bars, electrical fittings, sand, and bitumen, according to the KNBS.
The elevated costs have coincided with limited access to mortgage financing, constraining effective demand for newly built homes and slowing sales in key residential segments.
Private developers have also faced tighter credit conditions as banks prioritise working capital financing over long-term project lending.
The Parliamentary Budget Office (PBO) had, in March last year, warned that increased public investment in housing could risk crowding out private sector activity in the industry.
The PBO said at the time that the government’s active role in housing could reduce private investment and credit to the building and construction sector.
“The anticipated active role of public investment in the construction industry may have impacted the private investments in the sector, thereby reducing the overall contribution of the sector to the GDP, as well as a reduction in credit to the private sector for the building and construction sector,” the PBO said at the time.
KNBS data shows the slowdown in Nairobi approvals persisted throughout 2025, with the values consistently trailing 20.
