Kenya’s construction industry has been accelerating at a rapid pace and making a substantial contribution to the country’s strong GDP growth figures on the back of major public works projects and rising demand for mixed-use and residential developments. However, the market is not without its challenges, and the funding and financing environment at all stages of project execution is tough, creating negative cost implications and a potential obstacle to the industry’s long-term, sustainable growth. Given the strong growth in the sector and the number of projects in the pipeline, it is unsurprising that there is significant interest in penetrating the local market. While there are challenges in terms of funding for the government and financing and cash flow for contracting firms, there are also substantial opportunities. However, in the longer term, the sustained growth of the sector will be dependent upon the ability to bring more private funding into projects on the ground.
As one of the major markets of sub-Saharan Africa, Kenya is of increasing interest as a real estate investment destination. The 44.2m-person country and its 4.2m-strong capital Nairobi act as a gateway to a regional East African market, which is approaching 150m people. Domestically, the economy has been outperforming much of the world, the population is expanding and incomes are on the rise. Given these basic demand trends, it is hardly surprising that Kenya, like much of the sub-Saharan Africa region, is piquing the interests of a range of international funds and institutional investors. While there is undoubted potential in Kenya, the ability to tap into it is somewhat constrained, and affordability remains a concern. At the higher end of the residential market, the dramatic growth of the past five years appears to be slowing down. Indeed, across all segments investors are likely to adopt a wait-and-see approach as the country enters election season. Moving beyond that, Kenya’s strong growth fundamentals are likely to bring more foreign capital into the market.
This chapter contains interviews with Andrew Saisi, CEO, Nairobi Housing Corporation; and Ronald Ndegwa, Managing Director, Savannah Cement.