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June 3, 2020

Kenyan Property Trends and Developments

When COVID-19 was declared a public health emergency in 2020, economic activity was brought to a near global standstill, as governments imposed restrictions on movement to contain the spread of the virus. This unexpected turn of events affected many sectors in Kenya, including the real estate industry, and it continues to be a factor in key industry decisions amid COVID-19’s ongoing grip on the world. Studies have shown that the Kenyan economy contracted in 2020 due to the global ripple effect.For this reason, it is important to take account of the developments that occurred in 2020 before highlighting the trends and developments we expect to see in 2021.

The first quarter of 2020 saw the government of Kenya issue ministerial directives concerning social, health and safety requirements and impose curfews, travel restrictions and county lockdowns. This negatively impacted various property segments, in particular retail, commercial, travel, hospitality and leisure. For example, hotels across the country had to shut down as travel was affected for almost six months, costing the industry billions of Kenyan shillings. Hosts of short-term rentals such as Airbnb also had to turn to longer-term rental income due to a significant decline in users.

Prior to the COVID-19 period, services at the land registries were already affected by the disruptions caused by the ongoing transition to a digital platform. The onset of COVID-19 compounded this issue due to the physical closure of land registries within the country which crippled operations.

In terms of what lies ahead for an economy that relies on the hardest hit sectors for economic growth, we are inclined to the proposition that levels of disposable income are expected to decline therefore constraining investment in real estate.

The Impact of COVID-19 on Kenya’s Real Estate Sector and Emerging Trends for 2021

Commercial Sector

As stated earlier, the commercial property space in Kenya witnessed a significant decline in office space absorption due to the disruption caused by COVID-19. The work-from-home approach employed to curb the spread of the virus has led experts to project a further decline in demand beyond the first quarter of 2021, as remote working is increasingly becoming a mainstream way of life. Executives are expected to rethink their real estate strategies over time as the workplace is evolving to accommodate remote and hybrid workplace options.

Separately, the stringent health and safety requirements introduced as a result of COVID-19 have necessitated the provision of a safe and healthy environment for workers. Developers are now employing design strategies aimed at confronting the impact of infectious diseases to protect occupiers of buildings.

Residential Sector

In June 2020, the Kenya National Bureau of Statistics (KNBS) released the results of a survey which indicated that in six out of every ten households, the breadwinner was unable to provide due to the COVID-19 pandemic.

Given the resultant impact on livelihoods due to pandemic-related lay-offs and redundancies, thousands of Kenyans struggled to pay rent, with some requesting landlords to reduce or waive the rent, and others moving to cheaper housing options or opting to relocate from urban spaces to rural towns to save on costs.

On the flip side, the rise in demand for cheaper or more affordable rental options has led to a high tenant turnover in high-end developments. We expect to see this trend continue, thus catalysing the potential for private developers in the affordable housing market in the country side.

Hospitality Sector

Due to the COVID-19 pandemic, the world’s economy was shut down almost overnight, with the hospitality industry facing an unprecedented challenge as a result. Strategies to flatten the COVID-19 curve, such as community lockdowns, social distancing, stay-at-home orders, and travel and mobility restrictions, resulted in temporary closure of many hospitality businesses and significantly decreased demand in those that were allowed to resume operations.

Holiday homes are increasingly growing in popularity in Kenya, with Naivasha being much sought after as a holiday/second home destination for the upper and upper-middle classes. With the pandemic throwing mainstream tourism into disarray, holiday homes will become increasingly lucrative as a means for holiday-goers to escape the city while ensuring minimal contact with other tourists.


The 2020 third quarter report by Cytonn Investments, an investment and real estate company in Kenya, indicated that the land sub-segment recorded an overall annualised capital appreciation of 2.4% at the end of that quarter. This suggests that investors still consider land as a good investment in the long term.Our view is that this sub-segment will improve, as the market seems more stable in 2021.

Affordable Housing

The Kenya Mortgage Refinance Company (KMRC), the public-private partnership (PPP) firm formed by the government of Kenya, was established as a key institution to support the affordable housing pillar of the government’s Big 4 Agenda. It was incorporated on 19 April 2018 as a non-deposit taking financial institution with the single purpose of providing long-term funds to primary mortgage lenders (ie, banks, micro finance banks and saccos, which are savings and credit co-operatives) in order to increase the availability and affordability of mortgage loans to Kenyans.

KMRC was licensed by the Central Bank of Kenya in September 2020 to commence lending. Its licensing as the first mortgage refinance company in Kenya is expected to facilitate the growth of the affordable housing market. By making mortgages affordable for larger sectors of the population, and capping affordable housing loans at KES4 million in Nairobi and KES3 million with respect to the rest of the country, the affordable housing pillar of the Big 4 Agenda will be supported.

Changes in the Dispute Resolution Landscape

On 1 July 2020 the Kenyan Chief Justice launched the E-Judicial system which features virtual court sessions and a paperless court case management system. Although litigants, practitioners and judicial officers are still interacting with the new system (and there have been some challenges), dispute resolution through virtual hearings is seen as a big step towards helping improve access to justice and speedy resolution of land disputes.

Changes in the Tax Regime

Effective 1 January 2021, the government enacted fundamental changes to the tax regime, some of which directly affect the real estate industry.

  • Residential Rental Income Tax (RRIT)

The upper threshold of RRIT has been increased from KES 10 million to KES15 million per annum. The lower threshold has also been increased from KES144,000 to KES288,000.These wider tax bands will increase the number of landlords who fall within the ambit of the tax.

  • Home Ownership Savings Plan (HOSP) amendments

Depositors no longer enjoy a tax deduction on deposits placed with an approved HOSP institution. Previously, contributions of up to KES96,000 per annum to a registered HOSP were treated as an allowable deduction.Furthermore, the income of a registered HOSP, which was previously exempt from income tax, is now taxable.

System Overhaul at the Lands Registry

The Lands Registry will be undergoing a system overhaul that is expected to improve efficiency in the long term but may occasion delays in land transactions in the short term.

  • The ongoing land title conversion

On 31 December 2020, the cabinet secretary for Lands and Physical Planning notified the public, by way of a Gazette Notice, of the commencement of conversion of current title numbers to new parcel numbers, starting with Nairobi. The aim is to collapse the land registration system under the previous land laws which were repealed in 2012, to ensure a centralised and simpler land registration process, and reduce susceptibility to fraud.

  • What the conversion process means for landowners

Titles issued under the previous regimes will be cancelled and replaced with titles under the current regime.There will now be a centralised land registration process under one regime, in line with the constitution.The conversion is an ongoing process which we expect will take place over the next few months or more. There will be further publications in the Kenya Gazette and two daily newspapers of conversion lists covering other parts of the country. We are not certain how expeditious the process will be or whether conveyancing proceedings will stall in anticipation of migration from the old to the new system.

While the conversion of titles is not an economic issue per se, it will affect the time it will take to finalise land transactions. In an already volatile real estate market, the longer it takes to finalise registration, for instance, the harder the economic implications, especially since the release of funds is invariably pegged on registration being completed.

  • Implementation of the National Land Information Management System (NLIMS)

The government’s policy is to digitalise all land transactions and do away with the current manual system. It is intended that all processes from allocation of land, issuance of titles, change of user, subdivision, transfer, charge etc will be undertaken on the new NLIMS. The Ministry recently indicated to stakeholders that it has finalised the scanning of land records within the Nairobi metropolitan area and that it expects to launch the NLIMS in the first quarter of 2021. It is difficult to assess whether the Ministry will meet this target as the system is yet to be launched. In addition, the Ministry explained to stakeholders that it will first undertake the land title conversion process, so that all properties are able to comply with the requirements of the NLIMS. It is projected that digitalisation of land records for the remaining parts of the country will be concluded in 2022, before the end of the current president’s term. This is intended to improve efficiency in the long run.

  • Improved capacity at the land registries, including introduction of accredited private valuers

On 22 January 2021, the Ministry published a list comprising 247 accredited private property valuers approved to carry out valuation for stamp duty, in a move to enhance efficiency by decreasing turnaround times for conveyancing.

It is anticipated that the wide reach of private property valuers will boost government revenue, improve ease of doing business, decrease the turnaround time by up to 50% and improve Kenya’s international ranking in processing property deals, which is currently at 134 out of 190 countries.

  • Regulatory changes towards electronic signatures

On 18 March 2020, Parliament enacted the Business Laws (Amendment) Act 2020, with the aim of facilitating the ease of doing business in Kenya by providing for the use of advanced electronic signatures in place of the traditional signature. The new law came into effect at a time when the government was also fighting to contain the spread of COVID-19 through different media, including paper.

While electronic signatures are not a new concept in Kenyan law, the above law did away with the need for wet-ink signatures in virtually all legally binding documents, except for wills and negotiable instruments, such as cheques. Although this is a progressive regulatory change, electronic signatures are not yet available in Kenya as, by law, a valid advanced electronic signature can only be issued by a Certification Service Provider (CSP) duly licensed by the Communications Authority of Kenya pursuant to the Kenya Information and Communications (Electronic Certification and Domain Name Administration) Regulations 2020. At present, there are only two licensed CSPs in Kenya, which are yet to start issuing advanced electronic signatures. 

  • The new Sectional Properties Act

The new Sectional Properties Act 2020 (the Act) came into force on 28 December 2020, effectively repealing the Sectional Properties Act 1987. The Act now conforms to the new land regime that came into force in May 2012. It also addresses the challenges associated with the repealed law which mainly relate to provisions perceived as strenuous and burdensome.

The Act now requires all long-term sub-leases issued before the commencement of the Act, intending to confer ownership of apartments, flats, maisonettes, townhouses or offices, to be reviewed within two years of the commencement date of the Act. The aim is to enable conversion to conform to the requirements of the Land Registration Act 2012 with regard to geo-referencing and issuance of certificates of title and certificates of lease, as applicable. This is expected to pave the way to a clear practical approach to how to efficiently register titles for apartments and sectoral units.

Impact of Upcoming General Elections/Political Environment

Kenya holds its general elections every five years and the next election is scheduled to take place on 9 August 2022. The upcoming elections and political environment may have a greater-than-usual impact on business and investment, especially with the effects of the pandemic still being felt in the country. Investors presently tend to be reluctant to invest in new opportunities and/or projects in the country as they have adopted a wait-and-see approach, largely attributable to the uncertainties of transitioning to a new government. This is likely to have a negative short-term effect on the real estate market.


From our review of the above, we see a positive to neutral outlook for the real estate industry in 2021, especially following the global roll-out of the vaccine which raises hope for the containment of COVID-19. However, investors should be mindful that most businesses may be restructuring and downsizing their operations to survive another year of uncertainty prior to the 2022 general elections in Kenya, thus affecting uptake.

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