The year 2024 was an eventful one for Kenya’s real estate market, characterised by new trends, opportunities for investment, policy developments and setbacks worth reflecting on, as we ease into a new year.
During the year under review, after decades of reliance on the outdated Local Government (Adoptive By-Laws) (Building) Order of 1968, the National Construction Authority (NCA) launched a new National Building Code.
The code was formulated on the back of an increase in cases of construction-related injuries and fatalities, to promote quality, safety, health and acceptable environmental norms in the built environment.
Before issuing approvals and registering construction projects, county governments and the National Construction Authority would need to ensure that developers and contractors have adhered to the code. Professionals, contractors, construction workers and material manufacturers would need to refer to the code in preparing designs, supervising and implementing projects, as well as designing and innovating new materials.
Failure to comply with the code could result in fines that could exceed Sh2 million, site suspensions, and other penalties that could damage a developer's reputation and competitiveness in the market.
Unlike the new code that was well received by stakeholders, 2024 also saw the introduction of the controversial Finance Bill 2024 and the Real Estate Regulation Bill, which did not sit well with stakeholders. The Real Estate Regulation Bill sought to discourage property firms from engaging in fraudulent transactions, by subjecting them to strict disclosure, transparency, and purchasers’ indemnification obligations.
However, rather than solve the problems afflicting the sector, stakeholders held the view that the introduction of another regulatory measure would create confusion, increase bureaucracy, and hinder growth within the sector.
“There is a need to tame the operations of property firms to safeguard buyers from fraudsters, but the proposed bill could potentially undermine existing regulatory mechanisms,” said Kenneth Luusa, chairman of the Kenya Property Developers Association (KPDA).
Kenneth Luusa is the chairman of the Kenya Property Developers Association.
Photo credit: Pool
The bill recommended formation of a new registration and regulatory body for the sector, roles already performed by the National Construction Authority (NCA) and the county governments.
Photo credit: Shutterstock
“These pre-existing structures already contribute to the robust regulation of the real estate sector, emphasising the need for coherence and synergy in any proposed regulatory reforms,” noted Luusa.
Rather than introduce a new legislation and regulatory authority, the stakeholders recommended proper implementation of the existing frameworks, to avoid subjecting developers to more bottlenecks.
“A developer has to go through so many ministries, departments and agencies to get approvals. They currently amount to over 13 from various institutions,” said Mr. Luusa.
The bill also proposed to have the registered real estate agents regulated together with the property developers who build properties for sale and land buying companies that subdivide land for sale.
Eunice Macharia, Board Chair, Estate Agents Registration Board (EARB) speaks during the 254 Reality and Homes Expo organised by Nation Media Group on September 29, 2023 at The KICC Courtyard, Nairobi.
Photo credit: Billy Ogada | Nation Media Group
Eunice Macharia, the chairperson of the Estate Agents Registration Board, said that there needs to be a clear demarcation between the regulatory oversight of property developers and that of professional real estate agents. This is because developers and real estate agents adhere to different codes of conduct. Segregation of regulatory functions would thus ensure a more focused and effective regulation tailored to the distinct roles.
“Combining the regulation of developers, land selling companies and professional real estate agents, who are service providers to developers is unreasonable and in conflict with the smooth operation of the industry,” said Ms Macharia.
2024 also saw the introduction of a controversial finance bill that proposed the removal of Value Added Tax exemption on insurance and reinsurance services, including insurance on real estate products such as mortgage insurance.
As such, mortgage insurance would have been subjected to VAT at the standard rate of 16 percent, which insurers would have likely passed on to consumers, thus driving up the cost of mortgage loans. This would affect the rate of mortgage uptake in the country, which compared to the global average is quite low, making it even more difficult for Kenyans to purchase homes.
The Finance Bill 2024 had provisions that would not only have led to an increase in the cost of mortgage loans, but also construction loans, which would have made it more difficult for those looking to build to do so.
Following nationwide protests that left behind a trail of death and destruction, President William Ruto conceded to pressure and declined to sign the controversial Finance Bill 2024 into law.
The successful use of technology by the Gen Z movement to lobby against the Finance Bill 2024, inspired real estate stakeholders, including neighbourhood associations, to begin seriously leveraging technology to advocate for their rights to better housing.
Where the mainstream media was unable to highlight what was happening in the communities, social media began to be used as a tool for sharing unusual development activities within neighbourhoods. At no cost, urban residents would use technology to analyse and report on what was going on in their neighbourhoods, as an alternative to using crowd sourced data.
“We saw residents interrogating upcoming developments within their neighbourhoods, and sending images of buildings that fall short to the authorities in real-time for prompt action,” said David Gatimu, an expert planner.
Some communities began to use technology to create and share 3D displays of their neighbourhoods, and give feedback on where they would prefer certain amenities to be, based on their living conditions.
“On 3D models, we could see the residents drag and paste street lights to areas within the neighbourhoods where they felt there might have been issues of insecurity,” said Gatimu.
Other communities began to leverage technology to hold virtual barazas to engage in conversations around planning processes for a better understanding of how these could affect their lives. Different government agencies, including the urban planning and housing department, the health department and the environment department, were also challenged to actively leverage technology to work collaboratively.
Technology was also used to bridge the gap between development partners, donors and well-meaning organisations in the civil society, who often work in silos, preventing them from having complimentary coordination. Digital participatory tools were also utilised by the county governments to reach out to the most vulnerable and voiceless in their communities to give their views on ongoing projects.
Investors intending to purchase land for development also began to leverage technology to identify what was permissible in certain areas and whether those zones had any limitations.
2024 also saw an increase in the remote use of technology by investors to manage and optimise their property, particularly in the short-term rental market.
The adoption of technology increased the value of these assets, with online listing platforms such as booking.com, AirBnB, Vrbo and Expedia driving up occupancy ratios and therefore, rental yields.
“On average, the return on investment for a home on online platforms was about 30 percent higher than traditional short-term rentals,” said Eleni Georgopoulou, who runs YourHost, a property management firm.
Through data analytics, these platforms made it possible for homeowners to assess when to adjust rates based on demand forecasts and occupancy goals, thus enabling them to optimise their revenues.
Homeowners with limited time and expertise were able to manage their property efficiently through tools that could track occupancy, manage calendars, detect and control noise, among others.
“Artificial Intelligence solutions transformed short-term rental operations through automation. From a phone, an owner would be able to see all bookings in real time,” said Georgopoulou.
For the traveller wanting flexibility, ease, convenience and value for money, AI tools made automated lighting, temperature or entertainment control a possibility through voice commands.
Others were able to do virtual reality tours and 3D walkthroughs of rental properties before booking for better selection, while others would leverage digital tools for recommendations on local attractions and dining based on individual preferences.
More importantly, with cases of insecurity at short term rentals having risen in the year under review, modern technologies such as video analytics and artificial intelligence were used to beef up security.
While in the past, all that a CCTV could do was record for someone to playback manually and zero in on what happened at a particular time, technologies such as video analytics and AI enhanced the surveillance capabilities.
“For example, if a phone got lost, all that one needed to do with video analytics was search through the footage by name of that device. The results would show you every instance that the device was in view of the camera,” said Cyrill Kasembeli, Lead Engineer, SGA Security.
This made it possible for whoever was doing the search to quickly narrow down to the exact point at which the device was taken, thus saving time they would spend playing back through the entire footage.
Through the use of biometrics and machine learning technology, homeowners could also do instant identity card verification and passport vetting. Once a user uploaded their ID, the algorithms would detect whether the ID was fake or not.
“Facial recognition also became a thing. If someone blacklisted as a criminal walked into a premise, the owner would receive a wanted person alert, for them to report the matter to the authorities,” said Kasembeli.
After years of minimal activity, 2024 also saw the resurgence of Kenya’s Special Economic Zones, with an increasing number of new entrants pointing to a renewed investor confidence in the country. Within the year under review, reports from the Special Economic Zones Authority (SEZA) indicated that more than 21 enterprises that invested about $32 million (Sh4.1 billion) in the country, were issued with licenses. The year also saw an increase in uptake of real estate products by investors, in place of other assets such as treasury bills, bonds and equities, that were a few years back highly preferred.
This was attributed partly to rising concerns about the susceptibility of securities such as bonds to the government's high debt exposure. Kenya's public debt currently stands at more than Sh10 trillion.
The government has been implementing some austerity measures to manage the mounting debt crisis and possibly restore investor confidence, but questions have emerged as to how sustainable these are.
“Concerns about the safety of bonds due to the government's high debt exposure has seen some investors seek alternative investments, which include property,” said Sakina Hassanali, the Head of Development Consulting and Research at property firm HassConsult.
Other investors opted for real estate due to the sector's resilience to inflation, with the latest HassConsult Land price index, indicating that the average price of an acre of land across the city's suburbs grew at the fastest pace since 2015, despite the spike in inflation.
