21 August 2007

Kenya: Robust Property Market Attracts Global Players

Robust growth in the real estate market has attracted the attention of international players with consumers as possible winners, industry insiders say.

Mr Daniel Ojijo, the chairman of Mentor Group and a sponsor of a bi-annual real estate exhibition that takes place in Nairobi, said the entry of foreign players in the local market could bring in competitive pressure that is needed to tame runaway prices.

This year's edition of the event has attracted participants from Germany and Dubai and is fully booked, a month before it kicks off.

Popularity of the expo has been rising in tandem with increased awareness of benefits of home-ownership among Kenyans, high liquidity in the financial market and participation of Kenyans in the diaspora.

Mr Mandhi Sehmi, the managing director of E-Markets Dubai, said increased Kenyan investor interest in the Dubai market had awakened firms to opportunities in the local market.

E-Markets Dubai entices Kenyans to buy property in Dubai. "It has become an investment haven for budding investors worldwide, ranging from real estate to industrial products. We are offering local investors the opportunity to sample the products without having to travel to the location," said Mr Sehmi.

Dubai, an emerging international business hub, has been fighting for a piece of the local market with savvy offers to top end buyers. Many investors and developers in the sector are taking advantage of the city's investment friendly policies and incentives for investors.

Mr Holger Machon, the Senior Technical Manager of Optimum Security and Fire (K) and a first time exhibitor, said the company had been attracted to the Nairobi event by a recent upsurge in the national economy and the subsequent rise in activity in the property market.

Over 30 companies, including interior designers, garbage collectors and financial institutions, have confirmed participation in the expo that kicks off in early October.

The real estate scene has witnessed robust growth in the last couple of years, but has been slowing down especially in high income areas as emphasis shifts to middle and low income segments of the market.

Between 2002 and 2007, the average interest rate for mortgage loans dropped from 25 per cent to 11 per cent. This saw the value of mortgage loans rise to Sh26 billion in 2007. The figure has however stagnated for the past six months.

Last year, the real estate sector contributed close to seven per cent to the country's Gross Domestic Product. Growth in the industry has been attributed to high remittances from Kenyans in the diaspora, who rank second to Nigerians on the continent.

They prefer to invest in stocks and real estate market. The sector has also been dogged by controversy over property pricing, especially in high income zones.

Real estate industry players have accused each other of unfair trading in evaluation and pricing of property. Plans are under way to introduce a property index to reflect actual market trends and transactions.

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