Shanghai Daily
Chinese firms are participating in Kenya’s real estate sector, which is among the fastest growing sectors in the East African nation.
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 East African nation and fourth, the companies are manufacturing and selling building materials sourced from their home country, which Kenyans are embracing.
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 East African nation 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 8,139 dollars.
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.
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