Construction industry is set to bounce back to a 3.9% growth this year after suffering depressed performance last year on account of stricter COVID-19 rules. This is according to half year Status Report on the Build Environment Report ending June.
The Architectural Association of Kenya (AAK) says the growth will be underpinned by increased sector output. At the onset on coronavirus pandemic in March last year, covid containment measures deployed by the government saw industry projects either suspended or man hours reduced as a result of some workers being laid off and others put on furlough effectively impacting activities in the sector.
“This growth will be driven by a sharp recovery in output levels compared to periods when works were not permitted or were severely restricted in 2020, with Q2 2021 in particular recording high growth Year-on-Year, assuming there is no repeat of the strict lockdown similar to last year.
Infrastructural investments
Importantly, we project that the growth will particularly propelled by huge infrastructural investments by the Government of Kenya,” said Wilson Mugambi, AAK President. Among projects that AAK expects to sustainable growth this year include the on-going construction of the Nairobi Expressway, LAPSSET project whose first berth was operationalized on May 20, 2021 and the affordable housing programme which was allocated Kshs. 13.9 billion in the FY2021/22. AAK however forecast a 4.5% growth year-on-year as the sector recovers from negative impact of the pandemic going into next year.
“While this puts Kenya in line with the 2021 Sub-Saharan African average of 4.4% y-o-y for construction industry growth, the country will not be able to recover its pre-COVID growth rate. Kenya’s construction industry’s short-term recovery will be supported by a quick return of private investment in the country’s residential and nonresidential construction sector,” said AAK in the report.
While the industry is expected to remain resilient this year, price of steel, a key construction material which remains high amid weak global supply and rising demand could hurt projects implementation. AAK says price of a kilogram of steel increased by 25%, from Kshs. 85 in December last year to Kshs. 125 currently. On the other hand,the price of a tonne of steel bar doubled between April 2020 and May 2021 to hit Kshs. 80,000 according to data from the London Metal Exchange.
Real estate sector is further tipped to grow by 6.9% as a wave of new buyers rise on account of low interest rates which will accelerate construction and home ownership through higher mortgage uptake. Satellite towns such as Thindigua and Sykimau are backed to provide investment opportunities for middle income earners who will also not mind Riverside and Kilimani.
“We project that the sector will continue to experience consistently busy activity in the price bands not only below but also from Kshs. 10 million upwards, including the luxury market in excess of Kshs. 100 million.”
