Cost of construction drops by over 300 per cent in the last four years

The PS for Housing and Urban Development Charles Hinga flanked by the Chief Government valuer Jacinta Mutua address the press in Naivasha on December 9, 2021 during a conference on the mortgage sector in Lake Naivasha Resort. He said that cost of construction had dropped by over 300 percent in the last four years. [Antony Gitonga, Standard]

The cost of construction in Kenya has massively gone down over the last four years and this has been attributed to advancement in technology that has made work much easier.

Due to new technology, construction is more mechanised unlike in the past when it was manual. At the same time, the availability of cheaper construction materials such as gypsum has seen the building sector move away from wood which is more expensive.

Charles Hinga, the Principal Secretary Department of Housing and Urban Development, noted on Thursday that the 300 per cent drop in the cost of construction came even as the cost of land on urban centres went up, making it hard for potential homeowners to acquire land.

Data from the ministry shows Kenyans are also shying away from mortgages despite the fact that interest rates have remained below 10 per cent over the last four years.

Hinga said the cost of constructing a one-meter square currently stands at Sh25,000, having come down from Sh88,000 in 2017.

"The cost of houses has also dropped from Sh11 million to around Sh5 million per unit," Hinga said.

The PS said this has led to a massive increase in the number of houses being constructed in major towns leading to an oversupply, which has in turn pushed down the prices of the houses, including in Nairobi.

Hinga said the housing sector continued to be one of the fastest-growing in the country currently contributing 11.9 per cent to the GDP, from 7.5 per cent in 2019.

He however decried the low mortgage uptake in the country which he attributed to the poor mentality Kenyans have about loans.

“Despite the government creating a conducive environment for the mortgage market, there is poor uptake among Kenyans with the country recording only about 25,000 cases every year,” Hinga said.

Meanwhile, he termed the ongoing affordable housing project between the national government and private entrepreneurs as a game-changer in resolving the perennial house shortage in the country.

“For years, figures have indicated that the country has a shortage of 200,000 housing units every year. However, this has changed with more affordable houses coming up every day,” said the PS.

Hinga spoke in Naivasha, Nakuru County on Thursday, at the ongoing conference for stakeholders in the mortgage sector.

Kenya Mortgage Refinance Company CEO Johnstone Olteita identified rising prices of land as one of the challenges facing the mortgage sector.

“Despite the challenges, we have seen interest rates on mortgage drop from 14 to nine per cent and we are working with Saccos so they can also offer mortgage services,” Olteita said.

Chief Government Valuer Jacinta Mutua said the Ministry of Lands is keen to digitize all its services as part of its efforts to make the affordable housing programme a success.

“Title deed is everything in terms of land ownership and we have introduced sectional property titles that will make it easier for apartment owners to pay their rates,” she said.

At a glance:

-Affordable housing project affected by court case

-The project targeted civil servants and low wage income earners

-Country facing shortage of 250,000 units annually

-Crisis caused by rural-urban migration