Kenya Real Estate Investment Guide

Investing in real estate is a very lucrative business. Kenya is one of the most attractive property markets in Africa.

If you are an investor ready to explore this opportunity. Here is your complete guide to the Kenya real estate market.

Geography and Location

Kenya is a country located in East Africa. The nation borders five other countries;

South Sudan, Ethiopia, Somalia, Uganda, and Tanzania. The Indian Ocean forms its coastline in the east side.

Kenya’s major cities include; Nairobi, Mombasa and Kisumu. Other important urban centres include Nakuru and Eldoret.

At 580,367 square kilometres (224,081 sq mi), Kenya is the world’s 48th largest country by total area.

Population, People and Language

According to the 2021 CAHF report, Kenya has a population of 54.98 million. The country has a sparse population density of 94 people per sq. km, with 27.8% living in urban areas. 

The median age is 20.1 years. The three main languages spoken in Uganda are English, Swahili and Luganda.

The Population growth is at 2.28%.

Real Estate and Investing

The Kenya real estate sector has grown over the years and continues to show much promise for the future. In Kenya, the rental market dominates the industry. The residential sector has seen the most demand. This is due to a fast-growing population and a growing middle class.

The rental market is pretty lucrative in the major cities, with residential rental yields averaging 5.8% in Q3 2021, and retail yields doing reasonably well at 7.5%, in the same period, according to the Cytonn report.

The retail industry has expanded in an imposing manner. Owing to the ongoing expansion of mall space concepts. As a result of this, Kenya has become the second-largest in mall space ownership after South Africa.

There is an ongoing shortage of affordable housing. The national housing deficit stands at 200,000 units every year. The government’s target is 500,000 new affordable homes by the end of 2022. This is a great business opportunity for investors and property developers.

The real estate sector in Kenya has continued to grow exponentially with a growing contribution to the country’s economy. It added approximately $4.8 billion to Kenya’s GDP in 2020.

Factors like infrastructural developments, stable GDP growth and demographic trends such as rapid urbanization drive this growth.

Rental Yield:

Residential yield averages at 6.8%.

Other Investor information

• Ease of Doing Business Regional – 2020: 4th 
• Ease of Doing Business International – 2020: 56th
• Pro Landlord

Taxation

• Withholding Tax (WHT) – Dividends: 15%; Interests: 15%; Royalties: 5% (residents)/20% (non-residents)
• Capital Gains Tax – 5%
• Non-resident individual rental income – 30% (withholding Tax)
• Corporate Income Tax – 30%
• Personal Income Tax rates are progressive up to 30%
• Value Added Tax – 16% 
• Double Taxation Avoidance – Agreements with 14 countries
• 0% tax on Donations and Gifts

Source: Ubuturo Research

Economy

The economy of Kenya is market-based, with a few state enterprises. As of 2020, Kenya had the third-largest economy in Sub-Saharan Africa, coming behind Nigeria and South Africa. 

Different factors have boosted the performance of the economy. These include a stable macroeconomic environment, positive investor confidence and a resilient services sector.

The economy has significantly recovered from the global pandemic, owing to diversified growth sources and sound economic policies and management. This is slated to be one of sub-Saharan Africa’s more robust rebounds and recoveries in economic growth.

GDP

The national GDP was $110.52 Billion in 2021, with GDP Per capita at $2,007, with a GDP growth rate of 7.52%

Source: Worldbank Data

Economic Sectors

Major sectors include;

• Agriculture. Kenya is a leading producer of tea and coffee. It is also the third-leading exporter of fresh produce, such as cabbages, onions and mangoes. The agriculture sector includes other sub-sectors like forestry and fishing.
• Manufacturing. Kenya has a large manufacturing sector. It serves both the local market and exports to the East African region. It includes sub-sectors like; Food and beverages, textiles, automotive, metal and plastics.

• The services sector is the most significant contributor to the country’s revenue. It includes tourism and financial services.

Emerging Sectors

The construction and real estate sector is one of the fastest-growing. It is, without doubt, one of the most lucrative sectors to invest in, in Kenya.

Kenya’s urbanization rate is increasing at a rapid rate. Contributing to significant demand in the real estate sector.

Also known as the Silicon Savannah, Kenya has seen its ICT sector grow at an average of 10.8% yearly since 2016. It is a regional leader in;

Broadband connectivity, general ICT infrastructure, value-added services, mobile money, and mobile banking services.

Resources

The East African nation has proven deposits of;

• Oil and gas.
• Soda ash.
• Limestone.
• Titanium.
• Gold.

Kenya also holds significant amounts of copper, niobium, and manganese deposits.

Tourism

Tourism in Kenya is the second-largest source of foreign exchange revenue, contributing nearly 10% pre-covid.

The industry was significantly impacted by the pandemic and is still gradually recovering from these effects. In 2021 the Kenyan Government initiated the “New Tourism Strategy for Kenya 2021-2025.” This initiative aims to boost recovery and growth of the tourism sector.

Kenya has plenty to offer in terms of tourism. It has a climate with primarily pleasant weather conditions all year round, free from the extremes of summer or winter. 

Secondly, Kenya is a gorgeous and picturesque country with breathtaking sceneries, a diversified natural environment, and rich wildlife.

Also, the tourist infrastructure in Kenya is highly developed, with a network of well-managed national parks, highways, and easy flight connectivity (international and domestic). It also has an internationally recognized hotel and hospitality industry.

ICT

Kenya is a preferred destination for many investors in various industries and is well on its way to becoming a regional ICT hub.

The ICT market continues to grow due to favourable government policies and a dynamic digital environment.

The startup ecosystem in Kenya is one of the best on the continent. Kenya ranks among the Big 5 top startup countries in Africa. The East African nation raised US$574,809,000 in 2022, which is 17.2% of the continent’s total funding. It currently ranks 3rd behind Egypt and Nigeria in funding value.

Telecom Industry

The success of mobile money has played a massive role in pulling thousands of Kenyans out of poverty. It is contributing to the country’s economic progress.

Safaricom is Kenya’s largest telco network, and the most profitable company in the East and central African region. Its mobile money payment service, Mpesa is arguably the most successful mobile payment platform. According to Safaricom’s 2020 True Value assessment Report, the firm contributed KSh 654 billion to the economy, 6% of the nation’s GDP.

More than half of the nations GDP is transacted on the Mpesa platform.

Key Projects

Lapsset 

The LAPSSET Corridor Program currently stands as Eastern Africa’s largest and most ambitious infrastructure project, bringing together the 3 Eastern African nations, Kenya, Ethiopia and South Sudan.

Arguably Kenya’s most ambitious venture, the $17.9 billion Lamu Port-South Sudan-Ethiopia-Transport Corridor project, is hoped to boost economic activities and double the country’s GDP.

Its main components include Lamu Port, the Lamu-Ethiopia-South Sudan highway, the Lamu-Juba-Addis Ababa railway, an oil refinery and a 2,240km pipeline linking oil fields in South Sudan to the refinery at Lamu Port.

It also includes constructing three resort cities, Lamu, Isiolo and Lokichoggio. This also includes the construction of airports in the resort cities, with Isiolo airport which began operations in the beginning of 2022. The development of a 1,100MW power line, as well as a 185km water supply line, is also part of the program.

Final Thoughts

Despite the recent pandemic, real estate in Kenya is still a worthy investment prospect. As has been highlighted, several incentives drive this industry. The high urbanisation rate, demand for affordable housing and growing middle class are only part of the growth aspect of the property market.

Are you looking for an opportunity that will continue to grow? Visit African Real Estate Solutions for more details.