Pan African Housing Financier, Shelter Afrique has urged local developers to venturing into the affordable housing space to help improve uptake and reduce property glut being currently witnessed.
Speaking in Nairobi, Shelter Afrique Chief Executive Officer Andrew Chimphondah said most properties in Kenya were priced out of reach of many buyers hence the slow uptake.
“Most developers tend to add higher margins to the units they develop, which in the long run make such units rather expensive. This partly explains why there is a glut in the property market despite the reported housing shortage in Kenya,” Mr. Chimphondah said.
“My advice to local developers is that they would rather chase less profit and more volume because if they chase the profit and not the volume, they end up not having take-ups. They can achieve this by venturing into the affordable housing space,” Mr. Chimphondah said.
Developers have decried the high cost of land, high financing cost, poor infrastructure and lack of utilities, which they have to provide, thus pushing property prices up as they pass the costs onto the end-buyers.
“Land is very expensive in Kenya, sometimes constituting upto 40% of the cost of the house – probably the highest in Africa. The good news is that under affordable housing, there are new technologies and new building materials that can help reduce constructions costs significantly,” Mr. Chimphondah said.
The country has witnessed a housing glut build-up for the last three years with many ready developments sitting idle with no takers as a result of declining demand occasioned by lack of affordability.
According to the Kenya Bankers Association Housing Market Index for the second quarter of 2019, house prices recorded further declines between April and June mainly due to a weakening purchasing power among prospective buyers. The real estate ranks among the sectors with highest non-performing loans according to Central Bank of Kenya, prompting commercial banks to tighten their credit standards to property developers in order to reduce the level of bad loans in the sector.