Housing boom lifts Kenya to league of mid income nations
The updated national accounts, set to be unveiled this morning by Planning Secretary Anne Waiguru, show that the contribution of real estate sector to Kenya’s gross domestic product (GDP) has more than doubled to 10.6 per cent from the previous 4.9 per cent.
Kenya’s lucrative real estate sector has rapidly expanded to become the fourth biggest contributor to the country’s wealth, a review of national data shows.
The review is expected to catapult East Africa’s biggest economy to middle-income status, with per capita Gross Domestic Product rising to about Sh110, 000.
The updated national accounts, set to be unveiled this morning by Planning Secretary Anne Waiguru, show that the contribution of real estate sector to Kenya’s gross domestic product (GDP) has more than doubled to 10.6 per cent from the previous 4.9 per cent.
Stellar growth over the past 10 years saw the real estate industry dislodge the retail sector as the fourth largest contributor to the economy even as traditional sectors such as agriculture, wholesale and financial services continued to diminish
Kenya’s GDP – the market value of all goods and services that a country produces in a year – is expected to grow by a fifth to reach Sh4.5 trillion ($51.3 billion) from an estimated Sh3.8 trillion in 2013 with the release of fresh data technically known as rebasing.
Analysts expect the new data to dictate future investment decisions, projecting that banks and businesses are most likely to put their money in the property market in pursuit of higher returns from increased activity and growth in the sector over the past decade.
“The rebasing exercise offers banks insights into the emerging lending opportunities and identifies the growth sectors,” said Robert Bunyi, an analyst at Mavuno Capital.
This means that the upward reweighting of the property market is expected to shift the focus of Kenyan banks from consumer lending to home loans and financing to purchase land and carry out construction to capture the ever-growing sector.
John Ngumi, director of investment banking at CfC Stanbic Bank, said sectors such as real estate that have acquired higher weighting should become the most attractive to investors. “The sector (getting) upward reweighting will look most favourable,” Mr Ngumi said in an interview.
The revised real estate figures will be good news to companies such as London-based PE firm Actis, Centum, Housing Finance, Home Afrika and UAP that are currently investing heavily in the sector.
Other sectors that have gained higher weighting with the review are fishing, manufacturing, electricity and water, transport and communication, and hotels.
The Treasury should, however, not expect the cost of borrowing to go down, even though a larger GDP gives Kenya headroom to increase sovereign borrowing and cut reliance on the local debt market, economists said.
“It is unlikely that the rebasing of the GDP will have a dramatic impact on Kenya�s cost of financing,” said Razia Khan, Standard Chartered’s regional research head for Africa. Ratings agencies have anticipated the rebasing,” she said, adding that the market has already factored in the larger GDP in its dealing with Kenya.
-Adopted From Business Daily, Monday, September 29 2014
By DAVID HERBLING, hdavid@ke.nationmedia.com
