The Kenyan real estate sector before elections has enjoyed tremendous growth. According to the Kenya National Bureau of Statistics, in 2021, the real estate industry in Kenya contributed 8.9% of the country’s GDP. This improved record in the sector is supported by the focus on the development of infrastructures such as housing, water, and electricity supply.
On the flip side, we have factors that threaten this growth such as insufficient development financing and economic instability owing to the fast-approaching elections.
After the 2007 election violence, the election period in Kenya has been one filled with tempestuous streaks. As has been the tradition during an election year, investors keep off investing and Kenyans adopt a wait-and-see attitude as they await the political climate to cool.
In this article, we’ll look at the impact on the real estate industry in an election year. We’ll glean from past election trends; drawing insights from property seekers, social projects, and developers.
Impact on property seekers
As we are nearing the elections, property seekers and tenants generally tend to hold off their businesses in areas prone to election ferocity. Additionally, economic uncertainty drastically reduces purchasing power.
The reduction in the purchasing power for potential property seekers would either result in drawing back their search until the election period is over or pulling back to satellite towns such as Syokimau, Ruaka, Ngong, Ongata Rongai, Kikuyu among others as the house prices reduce drastically.
In addition, property seekers and tenants generally tend to avoid areas previously prone to election violence. With this, the real estate sector suffers certain corrections as landlords offer their existing and potential clients property concessions. This involves price discounts on house prices and rents to attract and keep the existing tenants.
Impact on developers
With the uncertain impact of the elections on real estate, developers slacken the construction during this election period until politicking levels cool down.
In addition, commercial banks and credit institutions tighten their loan terms to developers by lowering their loan limits to combat the increase in defaulters because of the economic uncertainties.
According to the statistics by the Central Bank in their 2021 quarterly economic review, the real estate sector in 2021 recorded an increase in the cumulative gross non-performing loans of Kes 69.2 billion from 57.7 billion in 2020.
Impact on social projects
As the outgoing government tries to fulfill its promises, there is a general increase in the levels of expenditure in the country.
The outgoing government rolls out various projects such as roads, sewer network projects, and water, among others. The real estate sector will benefit from these developments in the long run. After the election period, when developers invest in the regions developed they get to yield great returns.
During elections, the atmosphere is filled with uncertainty and economic strains. Investors keep off investing and Kenyans adopt a wait-and-see attitude as they await the political climate to cool. Majorly, stakeholders tend to hold off investing in the sector which reduces the value of the property, and prices, and generally affects the whole real estate industry.
However, despite this, there lies hope as the season of high politicking will end, the economy stabilizes, and we can rebuild the industry.
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