The impact of real estate in Kenya can be dated back to the mid 2000’s when there was an increase in housing demand. Over the years, real estate has proved to be major contributor to Kenya’s GDP.

In 2019, the GDP growth rate from real estate was at 7.3% in Q1 and had a steady decline through the years after that before a low plummet in Q2 2020, where real estate contributed only 3.7%. This was due to the decline in the economy’s rate of growth over the years which can be attributed to factors such as the repeated presidential elections, etc., which affected businesses at the time.

For the years after that, as the country was stabilizing, real estate value addition started to increase up to its new high in Q3, 2021, where it contributed up to 7.1% after the COVID19 pandemic. Real estate was very attractive at the time due to good housing demand and high rate of urbanization, a number of affordable housing projects, access to mortgage loans especially from Kenya Mortgage Refinance Company, and improved infrastructure which were attractive to investors.

In 2022, as the country continued to stabilize from COVID 19, real estate was slowly showing a decline from 6.1% in Q1 to 2.3 in Q4. In Q1 of 2023, Real Estate’s GDP contribution in Kenya grew up to 5.2%. There has been an anticipated plummet in real estate in the recent quarters due to decline of the country’s economic growth that result from high cost of living and tight global financial situations.

6 Different Real Estate Market Infrastructural Sectors

Real estate experts are constantly researching and educating on new ways in which investors can get value and high ROI’s from Kenya’s real estate. Before we look into some of the ways to make the most out of a real estate investment, real estate is divided into different infrastructural sectors;

  • Residential sector
  • Commercial infrastructure sector
  • Mixed use development sector
  • Retail sector
  • Land sector
  • Listed real estate sector

In each, we will specify their impacts on real estate, current trends and where there is a safe landing for investors.

Exploring Kenya's 2024 Real Estate Trends

Residential Sector

These include apartment units, villas and stand-alone complexes. They vary in their ROI depending on location, quality of infrastructure, marketing, property developers and population demography. Apartment units have been increasing over the years owing to the high rate of rural-urban migration which leads to a demand of vertical residential spaces.

Considering the rural to urban migration due to reasons such as jobs, better living conditions, etc, there is demand of apartments which come in handy in the consolidation of amenities that can be used by a number of tenants while still saving on costs. For investors, this is a good investment opportunity as apartment units bring about a rental yield of up to 8% and sometimes even higher to 16% depending on quality of interior finishes. Apartments also offer long term opportunities.

Villas and stand-alone complexes do well in high-end areas as investment opportunities. In places such as Runda, Muthaiga, Kitusuru, etc. The size, location and quality of this houses attract high prices and high returns.

So, if you are looking to invest in the residential sector, consider all this factors before investing. Are you looking to invest in luxury properties with high rates and returns or basic properties with high demand and high returns as well?

Commercial Infrastructure Sector

These include hospitals, office suites, malls, recreational centers, etc. These type of investments require a lot of analysis and are high risk investments. Their returns are based on rate occupation of the spaces, value of spaces, their impact to the users and general public, location and marketing. With the rise of technology, social media and influence, these places require a lot of maintenance, feedback and keeping up with trends to prosper. Their returns can be very fruitful with all factors considered.

If you are looking to invest in this sector, it is quite high risk and requires medium-large amounts of money but the return on investment can be high and long-term.

The government has offered opportunities to invest in such infrastructure through bonds. The private sector also has such opportunities for private investors through private equity real estate funds such as pension funds, endowments, equity and debt financing. A high return for such properties usually range from 4-6% p.a.

Mixed-use Development Sector

These includes a mix of residential, commercial and retail spaces. They include estates, malls, apartment blocks with shops to let and restaurants, etc. Mixed-use development usually fosters a sense of community and provide a variety of recreational activities. Valuing these properties can be challenging due to the variety of services offered. So many factors are to be considered such as the market approach, income approach, costs approach, etc. Depending on the impact of mixed-use developments, their value and returns can be very high. Involving real estate experts, planners, designers and engineers in such project saves you from risks of losing your investment.

Retail Sector

Retail spaces are mostly shops, warehouses, go downs, etc. These spaces depend on their demand and location to make yield. A good ROI for retail space can range from 7% or higher. Such spaces face major challenges such as the gradual shift into e-commerce, high rent rates, poor/low returns on businesses in the spaces. These spaces can benefit from the high purchasing power of Kenyans, demand of the different products and businesses required in such spaces. An extensive research is required before venturing into such opportunities since their success varies especially during this times.

Land Sector

Land is a good investment as its capital appreciation becomes better and good year after year depending on the land use (farming, building rentals, etc), location and generally land just appreciates over time due to its demand. Value of land this year is definitely higher compared to previous years which makes owning land a good investment.

Listed Real Estate Sector

This is the REIT market. This is a good investment opportunity for investors who do not want to directly own physical properties. They can invest in their development through D-REITs or get monthly income through I-REITs. Know more about REITs in our article on What are REITS and how to invest in them.

Real Estate has grown overtime and the opportunities are endless. Just be careful not invest without prior information of the property and doing your due diligence. Engage experts and do your research on real estate investment opportunities.