Before and despite the Covid-19 pandemic, real estate construction in the region has been on the rise. This following a huge demand and a race between the East & Central Africa States towards attaining middle income status. The region has over the last decade enjoyed relative political & socio-economic stability, marry that to the discovery of vast valuable mineral resources including the coveted crude oil within its states.
Middle income status is coming!
East & Central Africa has seen its largest number of rural to urban migration in the last 10 years largely attributed by the high level of educated population seeking blue & white color jobs. This is the core reason of the real estate boom, demand has highly risen giving birth to a diverse and exciting real estate industry.
Funding the Real Estate Boom!
Developing real estate is not a cheap affair so where is all this money/funding coming from? The answer to this question is the second most important reason to the real estate boom. Starting in the early 2000s the word “real estate” had just made landfall in the region. Most housing development were largely undertaken by governments and very little private housing construction was happening.
However due to the robust economic growth coupled by the rural to urban migration, a few private individuals saw a window of opportunity and setup residential and commercial units that gave rise to the vibrant sme economy. Later in the 2010s the foreign market took an interest into the region’s real estate setup and now are the largest investors in real estate industry in the region.
Following the Arab spring and the toppling of prominent Arab dynasties together with their governments/empires, left the entire Arab region economically devastated. The question in most of the wealthy houses in that region then became; where else can we invest? East Africa then became the cheapest and most lucrative alternative thanks to the geo-political stability and the ease of doing business. Nairobi city has the highest real estate Arab investment in the region largely due to its established housing market. 3 out of 10 construction sites in the real estate upmarket in Nairobi is Arab funded (follow us for more on the Arab Money)
China has the largest economy in the world and by default the highest number of new dollar billionaires. Their bid to penetrate global economy has brought them to our shores, while their government is largely funding grand infrastructure projects in the East Africa region, its diplomats have lobbied for a vibrate Chinese business environment for its own investors. 5 out of every 10 real estate developments in Nairobi upmarket are Chinese funded.
While the foreign investments at the moment mostly focus on upmarket the local investors are targeting the mass middle- and low-income markets. A mix of bank financing, saccos & collaborative savings has seen accelerated local investment in housing sector.
Did you know that the largest number of individual residential construction cranes in the whole of East & Central Africa are concentrated in Kilimani, Kileleshwa & Lavington?
The biggest challenge in the region’s real estate market is the lack of product diversity. Although real estate being a lucrative industry, lack of structure has produced few opportunities towards home ownership and especially to the common ‘mwanainchi’. Most of the lucrative housing projects are subscribed to by the same wealthy class over and over. Affordable housing schemes are not really affordable with most of the costing above U$D 30,000 for an average 2 Bedroom unit.
A look at the future.
Now that we understand the demand, the funding layout & the challenges what can we project for the next decade? Economics dictates where there is demand supply is inevitable. We shall see more and more foreign funding coming in to help fund the supply. We shall see more product diversity as new players innovate and tap to that middle to low income markets. However, the biggest growth will continue to be on the upmarket as these segment projects to have the highest returns on investment.
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Article By: Anold Mugo ~ Senior Property Advisor at GOLDMUT Group