It's time for banks to change tack in real estate financing

Nashon Okowa

The real estate sector continues to experience rise in non-performing loans (NPLs), according to Central Bank of Kenya reports. In fact it had the highest NPLs in the first quarter of this year. This has inclined some pundits to believe that it could signal the culmination of the near decade boom. I disagree. Financial lending institutions have tightened money tap to this sector and the government appetite for domestic borrowing hasn’t made it any easier. Coupled with the tangling building collapse and the new kid – demolitions, this sector is limping. 

While I acknowledge that the real estate and construction sector has had dismal growth, if any, in the last three years and could justify the rise in NPLs, a good percentage of real estate NPLs I reckon are as a result of the lackluster approach that banks have when scrutinising projects for financing and even during construction. It borders on indolence.