Kenya’s real estate sector continued to expand in 2025, with activity in property transactions and developments supporting economic growth, even as construction slowed.

According to the Kenya National Bureau of Statistics (KNBS), the sector contributed Ksh364.6 billion to gross domestic product in Q2’2025, up 5.5 per cent from Ksh339.2 billion in the same quarter of 2024.

The sector accounted for 8.1 per cent of GDP, unchanged from Q1’2025. Combined with construction, the two sectors contributed 15.3 per cent to GDP, down from 19.1 per cent a year earlier, reflecting a fall in construction’s share to 5.0 per cent from 8.7 per cent.

The government’s Affordable Housing Programme (AHP) remained a key driver. Data from the Architectural Association of Kenya showed 307 ongoing housing projects comprising more than 214,000 units. About 77 per cent of the units were part of the AHP, while 10 per cent were student housing, 7 per cent institutional staff housing, and 6 per cent private projects benefiting from VAT exemptions.

The programme gained momentum after the Affordable Housing Act of 2024 introduced a dedicated levy for project financing. County governments and private developers worked closely with national authorities to unlock land and fast-track approvals.

Infrastructure development also supported the sector. Key projects included Phase II of the Dongo Kundu Bypass, upgrades of roads under the Kenya Urban Roads Authority, and feeder roads, water, and sewer systems for housing projects.

These improvements enhanced connectivity and supported real estate growth, even as high construction costs and delayed contractor payments constrained faster progress.

Mortgage, retail, tourism boost

Access to mortgage finance improved through the Kenya Mortgage Refinance Company (KMRC), which offered long-term, single-digit refinancing to banks, SACCOs, and microfinance institutions.

By Q3’2025, KMRC expanded eligibility to include non-shareholder SACCOs and microfinance banks, enabling more lenders to provide low-cost mortgages to low- and middle-income earners. Bond issuances by KMRC helped sustain liquidity for mortgage lenders.

Retail and commercial developments also drove growth. Chains such as Naivas, QuickMart, Carrefour, China Square, and Panda Mart expanded aggressively following the exit of distressed chains like Nakumatt, Tuskys, Choppies, and Uchumi. Kenya’s position as a regional business hub attracted foreign companies, increasing demand for offices, apartments, and commercial property near business centres.

Demographics and tourism further boosted the sector. Kenya’s urbanisation rate of 2.8 per cent and population growth of 2.0 per cent sustained housing demand.

Visitor arrivals at Jomo Kenyatta and Moi International Airports rose by 52.2 per cent in Q3’2025, creating demand for hospitality-related real estate. Nairobi ranked sixth in Africa by planned hotel rooms, with 26 hotels and 4,344 rooms in the pipeline.

Despite these drivers, the sector faced challenges. Oversupply in offices and retail space contributed to higher vacancy rates. Financing remained constrained due to high borrowing costs and rising non-performing loans, which rose to 17.6 per cent in June 2025. The REITs market remained subdued due to capital requirements, limited legal entities, and regulatory delays.