Kenya’s Real Estate market crossed into 2021 with a mixed sense of anticipation following the panic and disruption occasioned by the coronavirus pandemic of 2019. So far, no one knows what to expect, and certainly everyone is waiting to see what shape the sector is going to take after the ruthless beating it took from the pandemic.
Just two months after Kenya recorded its first COVID case in May 2020, there was a 68% decline in the absorption of office space. Moreover, the decision by some companies to run their offices through the virtual space, also led analysts to foretell a further drop in demand during the early months of 2021.
Overall, the health ministry’s safety measures and protocols including county lock-downs, curfews, and social distancing have somehow affected the various property sectors i.e. Leisure, hospitality, commercial, retail and travel.
Since the pandemic hit its climax, many tenants are clearly struggling to pay rent. In extreme cases some have relocated upcountry. And there is growing trend of tenants and landlords talking to settle on friendly payment terms.
You must have seen this in your estate, or, maybe, you even had to negotiate to survive. This trend is expected to persist on through 2021 or until the situation stabilizes.
This coupled by other developments such as mass layoffs have also rendered more residential spaces vacant
Generally, most Kenyans could not meet their rental obligations due to their diminishing income. Unfortunately, things have continued to get worse and according to one research finding, only 0.7% of those interviewed confirmed to have enjoyed rent waivers from their landlords.
Being a capital intensive venture, real estate development needs enormous cash injection. Therefore, the staggering cash flow as a result of the pandemic has resulted in some property developers struggling to repay loans with others suspending some of their projects.
According to the Central Bank of Kenya, Non-Performing Loans had registered Ksh 366 billion by June 2020. Compounded by a shilling that is struggling against the dollar, Kenya’s real estate industry requires diligent handling to navigate the murky COVID waters.
The consequence of this disruptive trend is that fewer properties may be floated on the market through 2021.
The nationwide housing deficit projections tentatively stand at 200,000 units annually and an accrued deficit of more than two million units.
According to a June 2020 survey done by the Kenya National Bureau of Statistics, for every ten families, six had lost their source of income to the pandemic. The breadwinners could, therefore not provide
Out of ten respondents interviewed, nine expressed doubt and uncertainty as to whether they would return to work as soon as things return to normal.
The state of uncertainty might persist through 2021’s first quarter as the government seeks to jumpstart the economy.
Although no one can quite predict the full extent of the pandemic effect on Kenya’s real estate sector, the overall effect may be considerable. At the end of the day, it depends on the duration it will take and the steps that individuals, organizations and governing authorities will take to reverse its deadly effects.