East Africa Real Estate

Most East African countries experienced a real estate boom in the past decade which led to the current oversupply as most developers targeted high-end properties.

The resulting neglect of the lower-income groups has led governments in the region to reconsider strategies to provide affordable housing for low-income earners. Focus on affordable housing which began recently is expected to continue during the decade.

East Africa currently has a huge housing deficit of nearly 8 million units when estimates from individual countries are combined. According to Centre for Affordable Housing in Africa (CAHF) Kenya currently has an estimated deficit of 2million units, Tanzania (3 million units), Uganda (2.1 million units) and about 830k for Rwanda up to 2032.

Governments are expected to play a major role in bridging the current housing gap in order to reduce the spread of informal settlements which in Kenya for instance currently stand at 62 percent of the urban population.

The government’s intervention is especially required to create the appropriate incentives for developers and potential homeowners. In addition, there is need for job creation from both the private sector and government to boost income levels toward more affordability.

Speaking in a recent interview, Cytonn Real Estate Analyst Wacu Mbugua told CNBC in a recent interview that key challenges for developers include high construction costs across East African Countries and the high cost of capital.

Financiers have also had to weigh between the high cost of capital versus low short term returns in real estate relative to opportunities in other areas.

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