Financing Options and Growth of Real Estate Firms in Savings and Credit Cooperative Societies in Nairobi City County, Kenya
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Date
2024-11
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Kenyatta University
Abstract
Real estate firms drive economic growth by facilitating property development, providing housing and commercial spaces, employment opportunities, and wealth creation and investment diversification. Savings and Credit Cooperatives Societies financing supports real estate firms within Savings and Credit Cooperative Societies by providing affordable and flexible financial solutions, such as equity, mortgage, lease, and savings financing, enabling property acquisition and investment while fostering member-driven economic growth and financial empowerment. However, the challenges confronting real estate firms in Kenya, especially within Nairobi City County, are substantial, regarding financing decisions given the capital-intensive nature of their projects. The evident gap between annual housing demand and actual supply underscores the critical need for effective financing mechanisms to improve the expansion and development of the real estate industry. The research concentrated on investigating the effect of various financing options available through Savings and Credit Cooperative Societies in Nairobi City County is particularly relevant, given Savings and Credit Cooperatives s' role in offering financial services to their members. Evaluating the effects of mortgage financing, lease financing, savings financing, and equity financing on real estate firms’ growth can offer valuable insights into the feasibility of different funding avenues for these enterprises. Considering the moderating influence of real estate firm size on the relationship between financing options and growth rates enriched the analysis, acknowledging that a firm's size and scale can significantly shape its financing strategies and growth trajectory. Drawing on theoretical frameworks such as the housing cycle theory, lien theory of mortgage financing, transaction costs theory, and resource dependency theory provided a robust foundation for understanding the dynamics of financing and growth in the real estate sector. Adopting a descriptive research design, along with panel data analysis spanning a five-year period (2019-2023), facilitated an examination of trends and patterns among real estate firms operating within Savings and Credit Cooperative Societies in Nairobi City County. By employing a census approach to collect data from the entire population of 72 real estate companies, the study ensured a representative sample, enhancing the reliability and validity of the findings. The study found a significant and positive effect between mortgage financing, lease financing, savings financing, and equity financing and growth of real estate in Savings and Credit Cooperative Societies. The result indicated a moderating effect on the relationship between financing options and growth of real estate firms in Savings and Credit Cooperative Societies. The study concluded that the real estate sector in Nairobi City County requires effective financing options, relying on mortgage, lease, savings, and equity financing to optimize resource allocation and drive growth, with Size of real estate firms in Savings and Credit Cooperative Societies significantly and positively moderating the effect of these financing options on firm performance. Based on the study findings, policy recommendations include reducing mortgage costs through subsidies and regulatory reforms, increasing lease financing options via innovative structures, boosting savings financing through mobilization programs, facilitating equity financing with improved market mechanisms, and optimizing these firms, performance through targeted training. The study enriches understanding by demonstrating the significant effect of various financing options on real estate firm growth, advancing theoretical frameworks, addressing methodological gaps, and providing practical policy recommendations to support sector expansion.
Description
A Research Project Proposal Submitted to the School of Business, Economics, and Tourism in Partial Fulfillment of the Requirements for the Award of the Degree of Masters of Business Administration (Finance Option) of Kenyatta University, November 2024.
Supervisor
Moses Odhiambo Aluoch