Nairobi construction outlook

Property investments in Nairobi are expected to slow down following a freeze in the issuance of building plan approvals during the second half of 2019. The situation has far-reaching consequences as this could see investors holding off investments, a contraction in construction sector jobs and a decline in real estate transactions. Banks and other financial institutions could also lose business as construction is a cash-heavy business.

Forecasting the expected conditions in 2020, Architectural Association of Kenya president Mugure Njendu said that it is likely to be a bad year for the construction sector as investors are bound to seek alternatives.

“The first six months showed good recovery since the building approvals committee met fortnightly but only two sittings to review projects have taken place since then. Why are we stopping investments? Give us (architects) business, jobs for Kenyans and a market for suppliers,” said Ms Njendu

The slug in building plan approvals could affect Kenya’s ease of doing business which has improved over the past three years according to the World Bank’s ease of doing business reports.

“Kenya position was 61 in 2018 and 56 in 2019 but construction permitting fell from 128 in 2018 to 124 in 2019. It is Kenya’s worst performing sector that we have protested to City Hall, but to date no response has been given or action taken to remedy the situation,” she said.

Residential developments had a 20.1 percent increase in valued of approved buildings at KSh. 75.9 compared to 2018’s reported KSh. 63.2 billion approvals while commercial developments reported KSh45.4 billion. The number of approvals has declined over the past three years which has also led to lost revenue for the county.

“As you are aware, construction permitting is a key revenue source for the county but has been declining in the recent past. For instance, there has been a noted decrease in approvals in the second quarter compared to the first quarter,” said Ms Njendu.