Private sector credit to the real estate sector grew from 2.2 per cent to 4.9 per cent between March and June 2020. This is according to the Kenya Financial Stability Report by the Central Bank of Kenya (CBK).

However, private sector credit growth in the building and construction industry declined from 9.5 percent to 4.6 percent during the same period.

Trade, Households, Manufacturing and Real Estate, which are key to the overall economy and stability of the financial sector accounted for the most credit.

The report states that activity in the real estate sector declined in 2019 with subdued demand for property occasioned by slow economic growth, especially for middle and high-income earners.

The Hass Consult Limited All Property Index shows that property prices declined by 3.5 per cent and 1.2 per cent for sales and rental prices in 2019 compared to 1.9 per cent and 1.6 per cent increase in 2018, respectively.

Supply and demand for property have undergone significant volatility over the past few years resulting from slow economic growth, general elections uncertainties, banking industry instability and interest rate controls that constrained lending to the real estate sector.

The report also revealed that pension funds have increased funding to the real estate sector from Ksh. 1.6 billion in 2012 to Ksh. 238.65 billion in 2019.

Banks still contribute the highest proportion of private sector credit invested by financial institutions (Ksh. 395.18 in 2019) while insurance companies also invested Ksh. 84.07 into the sector.

Private sector credit from banks to the real estate sector grew by 3.8 per cent in 2019 compared to a 1.8 per cent growth rate for insurance companies and 3.8 per cent for pension funds.

Other financing sources for the real estate sector include mortgage finance companies, Savings and Credit Cooperatives (Saccos), capital markets (Real Estate Investment Trusts), off-plan purchases, and private sources.

The insurance industry continues to face various risks that may pose a threat to its stability, including elevated market risk arising from changes in interest rates, exchange rates, stock prices and real estate prices resulting in to decline in assets valuation.