Affordable Housing and Real Estate Investment in Residential Housing Sector in Kenya
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Date
2023
Authors
Ongaki, Sophia Moraa
Journal Title
Journal ISSN
Volume Title
Publisher
kenyatta university
Abstract
Affordable housing and determinants of real estate investments have received significant scholarly attention; however, there remains limited scholarship and consensus on the relationship between affordable housing and real estate investment growth in Kenya. Provision of affordable housing has remained a challenge in many developing nations including Kenya. Kenyan real estate investment especially the residential housing sector is facing poor growth rate due to its unbalanced focus. Residential real estate investment mostly focuses on the elite, high income earners while giving little focus to the majority who belong to the low and middle class households. The study aimed at determining the effect of affordable housing on real estate investment capitalization in the Kenya. It focused on identifying key indices of affordable housing in Kenya and recommended ways of increasing residential housing affordability to promote the growth of real estate investment through increased capitalization. Evidence indicates that majority of the houses constructed targets the elite and wealthy individuals hence majority of the housing units constructed remain unaffordable to the low-income earners, which affects residential real estate investment. The real estate market in Kenya has been on the decline owing to many factors, such as oversupply of high-end residential property and constrained access to credit facilities. The specific objectives were to: determine the effect of housing prices, household income, cost of mortgage, and moderating effect of inflation on real estate investment in the housing sector in Kenya. The study was anchored on permanent income theory, liquidity preference theory, anticipated income theory, rational choice theory, and decision theory. Positivism research philosophy and explanatory research design were adopted for the study. The study population comprised of real estate firms registered in Kenya. Using Census technique, a document review guide was applied to collect data from Real Estate firms registered by Estate Agents and Valuers Registration Board under Ministry of Land, Housing and Urban Development (N=80). The study adopted a 10-year period ranging from years 2010 to 2019. Data sources were: annual reports and financial statements from real estate companies. Data was analyzed using: Descriptive statistics, correlation analysis, and time series analysis. Data were presented in form of figures and tables. Diagnostic tests such as normality, multicollinearity, heteroscedasticity, stationarity and autocorrelation tests were conducted. Ethical considerations were observed to maintain integrity in the research process. The study found that housing prices, household income, and cost of mortgage all had a statistically significant effect on real estate investment in residential housing sector in Kenya. The study further determined that inflation had a significant effect on the relationship between affordable housing and real estate investment in residential housing sector in Kenya. The study recommends government’s cushioning prospective home owners from economic shocks and inflation, reduction of excessive taxes on construction materials, encouraging alternative income sources for households, the need for innovative financing in addition to provision of government tax incentives and exceptions/grants for private developers to build affordable residential units. The research effort further recommends that investors should find alternative sources of building materials.
Description
A Thesis Submitted to the School of Business, Economics and Tourism in Partial Fulfilment of the Requirements for the Award of the Degree of Master of Science (Finance) Of Kenyatta University
Keywords
Affordable Housing, Real Estate Investment, Residential Housing, Kenya