Real estate outlook amidst global downturn

The real estate sector in Kenya has shown resilience in the face of rising interest rates, cost inflation, and reduced buying power over the past two years. Despite these challenges, the market is expected to continue growing, with Night Frank predicting a growth rate of 5.88%. Reuben Kimani, CEO of Username Investment Ltd, highlighted the fundamental factors driving this growth, such as population increase and urbanization leading to a high demand for affordable housing. He emphasized that although the economy may not be performing optimally, the real estate market in Kenya remains robust, especially within the affordable housing segment. The impact of cost inflation on the real estate sector varies across different segments. Kimani explained that while high-end properties and commercial spaces may experience a slump due to inflation, the demand for affordable housing remains steady. Housing is a basic need, and people are willing to allocate a portion of their income towards securing a place to live. This trend insulates the affordable housing market from the full effects of inflation, highlighting the importance of catering to the diverse housing needs within the sector. Policy developments in the housing sector, particularly focused on affordable housing, have had mixed effects on the market. Kimani discussed the government's efforts to encourage affordable housing through various policies and tax incentives. However, he also pointed out challenges such as increased capital gains tax rates, which can impede the private sector's ability to meet housing demand. While there are positive aspects like support for first-time homeowners, there remains a need to address the overall impact of policies on the sector's growth and the private sector's role in facilitating housing development. Looking ahead, Kimani offered investment advice for those interested in the real estate sector. He advised caution when considering investments in office spaces, given the current trends towards remote work and reduced demand for traditional office setups. Instead, he recommended focusing on emerging locations with lower property prices, such as Ngong, Mombasa Road, Ruiru, and Kagundo Road, where significant gains could be made. In the retail space, Kimani highlighted the importance of strategic location selection, emphasizing the need to target areas with a strong purchasing power to ensure the success of malls. In conclusion, despite the challenges and uncertainties in the real estate sector, opportunities for growth and investment exist for those willing to navigate the evolving landscape of the market in Kenya.