Tough borrowing conditions has slowed down construction of residential houses and kept rents in Kenya high, according to those in the industry.
The ministry for housing and developers now say banks and other lenders should develop financing products that match the long repayment periods required for rental housing projects.
This, they said, will enable, investors recover their money gradually through monthly rental income.
The financing challenge is particularly significant as demand for rental housing continues to outpace supply in Nairobi and other urban centres.
Speaking at the groundbreaking of the Sh1.8 billion Muzi Enzi rental housing project at Tatu City, International Housing Solutions Kenya managing director Kioi Wambaa said rental housing requires “patient capital” that is affordable and available over a longer period.
The developers argue that unlike houses built for sale, rental projects require investors to commit capital for years before recovering their investment through monthly rental income.
“The rental model basically needs patient capital, when I say patient capital, you need capital, but it’s not expensive. ,” said Wambaa.
He said for one to buy land, build and then rent over time to get your returns, they need a longer period of time.
Housing Principal Secretary Charles Hinga said housing delivery requires the right combination of land, finance, affordability and appropriate loan tenors.
In a speech delivered by an official in the ministry Don Kagisha, Hinga said Kenya needs long-term capital suited to the risks and timelines of housing development.
“The test is whether households can occupy the homes intended for them. That means considering land, finance, affordability and the right tenor options. If you build homes people cannot afford, we have not solved the housing problem,” he said.
The government estimates that Kenya has a housing deficit of about two million units, with the gap growing by roughly 250,000 units annually. Developers cited estimates showing that only about 50,000 units are supplied each year against annual demand of 250,000 units.
This persistent supply shortfall leaves households competing for the available established housing stock, contributing to higher rental costs in areas where demand is strongest.
The developer said the financing challenge is more pronounced on the rental side because projects cannot rely on customer deposits to the same extent as developments targeting home ownership.
“For houses for sale, there are various financing models that you can use. You can use the bank’s financing, you can use your own equity, or you can even use the customer deposits, however, on the rental side…you need patient capital” the developer said.
