How developers can navigate funding challenges

3D rendering of a house undergoing amplifying renovations with an energy chart, blueprints and other documents. [Getty Images] Among the key industries that contributed to Kenya's 4.7 per cent growth in gross domestic product (GDP) in 2024 was construction. The sector, however, had a negative growth of 0.7 per cent. As a result, the real estate sector also recorded a decelerated growth of 5.3 per cent in the same period from 7.3 per cent in 2023. This is the period when businesses were reeling from high lending rates that only started cooling off in August. Data from the Kenya National Bureau of Statistics (KNBS) 2025 Economic Survey also reflected this change, as the number and value of completed buildings in the period also dropped. "The total value of completed buildings in Nairobi City County declined by 2.3 per cent to Sh149.9 billion in 2024. The number of reported completed private buildings declined from 22,093 in 2023 to 21,807 in 2024," the survey says. Amid taxes such as the export promotion levy that affects clinker and steel imports, and interest rates, funding has become a challenge to the sector. It is the reason why players are exploring other avenues that can offer patient capital to developers. Crowdfunding, public-private partnerships (PPPs) and venture capitalists are some of the alternative funding models that are being fronted. Elizabeth Costabir, the chief executive of BuyRentKenya says the market has several novel financing options only but developers have developed cold feet. "While new financing options like crowdfunding, blockchain-based investments, and fintech lending offer alternatives, many investors and developers are hesitant due to lack of awareness, trust issues, and regulatory uncertainties," she says in a publication by the Kenya Property Developers Association (KPDA). Ms Costabir notes how high interest rates and inflation have driven up the cost of borrowing, making it harder for people to afford loans. "Many banks and lenders still have strict credit requirements, meaning first-time buyers and small developers struggle to qualify for funding," she says. "Even when financing is available, bureaucracy and slow approval processes can delay projects, increase costs and cause frustration." She explains that despite the challenges, new models of financing continue to emerge. "Navigating this landscape successfully requires good financial planning, knowledge of available funding sources, and a strategic approach to securing capital," she says. Venture capitalist, she points out, is one of the novel models that is quickly gaining momentum in the sector. Similarly, pension funds, insurance companies and Real Estate Investment Trusts (Reits) also fall in the same category. "These deep-pocketed players are drawn to high-growth, large-scale, and profitable projects-think commercial properties, major housing developments, and cutting-edge real estate solutions like co-living spaces and PropTech startups," she says. "With their backing, more money is flowing into the industry, creating opportunities not just for big developers but also for smaller players looking to break into the market." Ms Costabir says for those open to exploring alternative models, options like peer-to-peer lending and blockchain-based investments are also unlocking new ways to finance real estate. "The key is knowing where to look and how to position yourself to secure the right funding for your project," she says. For those seeking to go the PPP route, Caroline Njoroge, Assistant Project Manager at Turner & Townsend, cautions on the complexity that comes with this undertaking. She notes that simple and transparent legal and regulatory systems are necessary to provide for smooth coordination. However, administrative barriers and juridical complexity tend to cause delays. "Furthermore, lengthy negotiation and approval procedures coupled with the unpredictability of political and economic changes exacerbate layers of complexity," she says. She notes that provision of financial viability requires sound financial modelling, value for money assessment and risk analysis, while public confidence must be nurtured by skilful public relations and stakeholder participation. "Lifecycle and maintenance cost considerations in the long term should be exhaustively considered to escape projected profitability reductions," she says. Ms Njoroge says PPPs present an alternative financing option for real estate developers to develop iconic projects despite financial constraints. She states that through the integration of public and private sectors, PPPs can help to realise the potential for urban and infrastructure development. "PPPs will be key players in the transformation of the real estate landscape of our cities of the future. It is therefore important for developers and government agencies to consider using PPPs to solve the challenges of current real estate development," she says. The government has adopted PPPs in executing the affordable housing programme, which is being supported by the 1.5 per cent housing levy imposed on basic pay. Head of Sales at Superior Homes, Clive Ndege notes that access to affordable financing remains a major obstacle for many prospective homeowners and developers. This is despite the introduction of initiatives such as the Kenya Mortgage Refinance Company (KMRC) that partners with banks and saccos to offer single-digit home loans to borrowers. Using South Africa as an example, Mr Ndege proposes PPPs and joint ventures to navigate the financing challenge in affordable housing. He references the World Bank, which shows the cost of building a house in Kenya is 30 per cent higher than in South Africa, largely due to infrastructure-related expenses such as inadequate road networks, unreliable water supply and high land servicing costs. While Kenya has an average of 30,000 mortgages according to the Central Bank of Kenya, South Africa boasts of 1.2 million. "PPPs could help bridge this gap by fostering collaboration between real estate developers and government agencies. For instance, developers could contribute a percentage of project costs while the government provides land, road networks, and regulatory approvals," he says.

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