Construction Cost and Growth in Supply of Real Estate Housing in Kenya
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Date
2016-12
Authors
Ngugi, Samuel Mungai
Journal Title
Journal ISSN
Volume Title
Publisher
Kenyatta University
Abstract
The provision of affordable housing is one of the goals of achievement of vision
2030. Affordable housing was also an important deliverable in the millennium
development goals. However the growth in supply in real estate has been poor. For
instance the demand for housing has been 150, 000 per year as compared to 35, 000
housing units that are delivered in the market annually. Thus, the supply has fallen
below target in this deficit has been a practical and policy problem that has led to the
debate of what could be the cause of the slow growth in supply of real estate housing
in Kenya. The main purpose of this study was to the effects of construction cost on
the growth in supply of real estate housing in Kenya. This study was guided by the
following specific objectives: to establish the effect of finance cost on the growth in
supply of real estate housing in Kenya, to determine the effect of cost of building
materials to the growth in supply of real estate housing in Kenya, to establish the
effect of cost of land to the growth in supply of real estate housing in Kenya and to
determine the effect of tax cost to the growth in supply of real estate housing in
Kenya. The study adopted a descriptive research design. The target population was 78
registered real estate companies in Kenya. The sample size was therefore 39
registered real estate companies in Kenya. Primary data was collected through the
administration of the questionnaires. The study found that finance cost, cost of
building materials, cost of land and tax cost have a statistical and negative influence
on the growth of supply of real estate housing. The study also concludes that increase
in growth of real estate market despite the high interest rate could owe to the price
inelastic demand for housing owing to economic disparity in the country. While low
income earners, who are majority, are pushed away to less glossy and crowded homes
where survival supersedes luxury, the upper middle income purchase of housing units
is on the upward spiral. The study recommended that the government should lower
interest expenses so as to encourage the increase in supply of affordable real estate
housing. The bank should also lower their interest rates so that the real estate firms
can be able to increase the supply of housing. The study also recommends that
investors should consider investing in the real estate market despite the erratic interest
rates.
Description
A Research Project Submitted in Partial Fulfillment of the Requirements for the Award of Degree of Master of Business Administration (Finance) of Kenyatta University, December, 2016
Keywords
Construction cost, Growth, Real Estate Housing, Kenya