By Morris Aron
Growth in real estate sector slackened last year despite huge loan advancements from banks to one of the most resilient segments of the economy.
Analysts said that while the sector still holds great promise for growth, high interest rate regime and political risks in an election year might dent growth prospects. This may, thus, slow down construction and even herald mortgage loan defaults.
“The business environment is bound to get tough in the coming months especially after realisation that interest rates are not coming down as initially thought,” said Frank Ireri, Managing Director of Housing Finance.
Economic Survey 2012 data indicates property market grew by 4.1 per cent last year compared to 4.5 per cent in 2010 while loans and advances went up by 55 per cent to Sh50.8 billion.
The report shows that cement consumption went up by 10 per cent last year to 3.1 million tonnes. In addition, the value of private buildings — a key indicator in the sector — grew to Sh43.1 billion in 2011 compared to Sh38.3 billion in 2010.
While the short-term future looks gloomy, hope for growth in the sector now lies in road construction sub-sector, for which the Ministry of Roads has set a budget of Sh82.3 billion this year.
Road construction goes hand in hand in boosting activity in the real estate sector since new buildings come up while pre-existing property values appreciate.
