Kenya’s real estate investors now turn to Treasury bills
Potential investors in Kenya’s stock market and real estate industry have minimal choices in regards to where to invest their money as a combination of political and economic factors continues to depress.
Industry experts have said that returns on the property and stocks markets have significantly reduced and investors are now shifting their money to risk-free, short-term Treasury bills and bonds, which guarantee a fixed rate of return.
Returns on the two-year Treasury bond stood at 12 per cent while returns on a 91-day Treasury bill stood at 7.91 per cent last week.
Dr. Odhiambo Oundo, a lecture at the Department of Real Estate and Construction Management at the University of Nairobi says that there has been a general thinking and perception that the real estate industry is sinking a notion that he concurs with adding that the industry experienced a boom in the past years, it was obvious that the sector could experience a slowdown.
Dr Oundo, who is also a consultant at Roack Consult Ltd, said that the turbulent political temperature ahead of the general elections slated for next year, high interest rates and reluctance by commercial banks to accumulate non-performing loans have left the industry with minimal avenues of investments.
Volatility of interest rates
According to investment analyst at cytonn, investors should be conscious of short-term fixed investment due to volatility of interest rates in the current economic environment.
The Central Bank of Kenya has maintained its lending rate to commercial banks at 10.5 per cent and reviewed the uniform base lending rate — the Kenya Banks Reference Rate (KBRR) — to 8.9 per cent, from 9.87 per cent, to curb the high interest rate regime.
The parliament recently passed the Banking Amendment Bill, which, if assented to by President Uhuru Kenyatta, will level interest rates cap at 14.5 per cent.
According to the executive director of HF Development and Investments Ltd, a subsidiary of HF Group Mr. James Karanja, investors are shying away from the real estate industry because of the uncertainties surrounding the upcoming elections while the demand for houses has drastically gone because of tight liquidity caused by skewed distribution of cash in the banking sector.
A big percentage of the money in the banking system is being held by big banks, which are not specialized in lending to the real estate sector.
