Chinese firms offering Kenyan home buyers good choices
06 May 2014, 13:26
Nairobi - Chinese firms are participating in Kenya's real
estate sector, which is among the fastest growing sectors in the country.
The over 3.5 billion U.S. dollars industry had been mainly dominated
by local firms and a few from Europe. However, with Chinese companies'
involvement, the market is becoming diversified.
The Chinese firms have entered the industry in several ways. First,
they are massively investing in housing projects on the outskirts of
Nairobi, providing buyers with various choices. Second, the houses are
being sold at fairly affordable prices compared to others in the market.
Third, they are offering some of the cheapest mortgages in the country and fourth, the companies are manufacturing and selling
building materials sourced from their home country, which Kenyans are
These materials include wall panels, tiles, glasses and doors.
Analysts noted that Chinese firms' entrance into the real estate sector
is coming with a lot of gains for Kenyans seeking to own homes.
"I have checked around and one of the things that stand out with the
Chinese companies in this sector, as in others where they have presence
like roads, is that they are offering some of the best prices," said
real estate analyst Antony Kuyo.
Prices of houses in Nairobi continue to rise as cost of building
materials and value of land appreciates due to increased demand.
"Most Chinese companies are offering houses fair prices compared to
the local ones, including in high-end districts of the capital. In
high-income areas, a two-bedroom apartment constructed by the Chinese is
going for 151,162 dollars, but others are selling it for up to 186,046
dollars," said Kuyo.
He added that this shows if more Chinese companies enter the sector, then prices of houses in Kenya can drastically come down.
"The companies can leverage from their experience back home to build
affordable houses in Kenya using low-cost technologies, which we lack
here," said Kuyo.
Banks in the country are charging mortgage interest rates
between 13.9 percent and 19 percent, which have discouraged developers.
But Chinese investors charge lower mortgage rates.
"With mainstream lenders hanging on with tenacity to such high
margins on their lending, the delayed take-off in Kenya's mortgage
market is distorting the country's housing range, discouraging private
developers, and locking out many Kenyans from home ownership," noted
Carole Kariuki, the MD of The Mortgage Company (TMC) while releasing a
report for quarter one of the sector's performance last week.
The report showed only 1 percent of Kenyans living in urban areas can
currently afford mortgage repayments for a house priced at 66,279
dollars, and a further 4 percent for a house priced at 45,358 dollars.
Kariuki further noted that half of all Kenyans living in urban areas,
specifically Nairobi, cannot afford loan repayments to buy a house at
However, while she called for government's intervention either
through supporting mortgage-backed securities to stimulate the secondary
mortgage market, or through the creation of housing funds and even
mortgage subsidies, she acknowledged the low mortgage rates charged by
some Chinese investors.
"We have seen some Chinese investors offering interest rates of less
than 10 percent because of their financial muscle and support they get
from home, this is a good thing."
One of the investors is offering Kenyans a mortgage rate of 8.5
percent per annum for 25 years for a house going for 69,767 dollars.
This is the lowest in the Kenyan market today.
There are currently a paltry 20,000 mortgage accounts in Kenya, and this has been attributed to high rates of most lenders.
"To make a real difference for the average Kenyan, mortgage rates
need to reduce from the current 16 percent to between 6 percent and 9
percent a year. This will be a major shift, but it is still not enough
to allow for universal home ownership," said Kariuki.