A new report has revealed the status of the real estate sector in the country painting a grim picture of its prospects regarding its growth in the near future.
The report released by the Central Bank of Kenya (CBK), detailed how the pandemic shaped various businesses followed by the gradual lifting some of the containment measures, that weighed heavily on the sector.
According to the report, credit to real estate had the deepest slum in 2021. Homeowners largely shied away from taking bank loans to fund their construction projects as the economic was in a coma.
Remitted loans to the sector had the deepest slide of 92 per cent to Ksh2.6 billion compared with Ksh30.2 billion that was issued in 2020.
Justifying the slump, CBK noted that the drop was as a result of dipping sales and increased rental prices in the real estate sector.
The problems in the sector further increased defaults in the mortgage loan books that are mostly advanced based on the strength of the payslips.
The drop in loans acquired by homeowners further affected the households. Banks issue household loans based on salaries, but with the latest report, the remitted loans dropped by 11 per cent to 17 billion.
The impact also was felt on loans advanced to households appliances like furniture, refrigerator, and other office equipment. Their security dropped by 2 per cent to Ksh43.7 billion.
However, traders were the biggest beneficiaries of bank loans. According to CBK, the net credit advanced to traders increased by 136 per cent to Ksh41.5 billion in 2021. This is after most financial institutions dropped some of the purses attached to the acquisition of credit.
As a result of increased appetite by business owners to acquire credit, their stock of loans was pushed to Ksh526.5 billion.
