Abstract
Real estate investment plays a crucial role in providing employment opportunities, offering shelter to households, enhancing income distribution and alleviating poverty. One of the most important factors in real estate development, world over, is its financing. Unlike the developed countries that use stocks and bonds, financing of real estate developments in Kenya is predominantly through mortgage financing. This study will seek to find out the relationship between mortgage financing and real estate development in Kenya. This study will adopt an explanatory research design by review of the literature.
Highlights
Real estate investment plays crucial role in providing employment opportunities, offering shelter to households, enhancing income distribution and alleviating poverty
Despite the boom in Kenya’s real estate sector, mortgage finance is still accessible to only a small majority of the Kenyan population, adversely affecting real estate development in the country (Walley, 2011)
It is evident that mortgage financing is the most used source of financing for real estate development in majority of the countries
Summary
Real estate investment plays crucial role in providing employment opportunities, offering shelter to households, enhancing income distribution and alleviating poverty. Real estate has been one of Kenya's fastest growing sectors over the last decade, fuelled by a burgeoning middle class with higher disposable incomes. In 2012, the value of Nairobi's prime real estate grew by 25% while at the Kenyan coast it went up by 20% outdoing other major cities like Miami (19.1%), London (12.1%), Moscow (9.8%), New York (3.1 %), Shanghai (-3.4%) and Singapore (-4.7%) (Central Bank of Kenya, 2013). The cost of mortgage loans is out of reach for the majority of middle-class Kenyans and compares poorly with peer countries in Africa, a new report by the Centre for Affordable Housing Finance in Africa (CAHF) has showed. About 11 per cent of Kenyans earn enough to support a mortgage This means that most middle-income earners cannot afford an average mortgage necessary to buy an entry-level house," says the report. Despite the boom in Kenya’s real estate sector, mortgage finance is still accessible to only a small majority of the Kenyan population, adversely affecting real estate development in the country (Walley, 2011)
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