Real estate sector eyes 2026 rebound on policy, tech shifts

Real estate developers in the country are forecasting a strong recovery for the property market in 2026, banking on government housing drives, alternative financing, and technology to overcome persistent high costs and inefficiencies that have plagued the sector.

After a turbulent 2024 marred by high interest rates, costly construction inputs, and sluggish sales, industry executives reported a market stabilisation in 2025.

This, they say, sets the stage for a renewed growth cycle in the new year, backed by state-backed affordable housing, major infrastructure projects, and institutional demand from a United Nations expansion in Nairobi.

The United Nations Office in Nairobi (UNON), a major diplomatic hub, is undergoing a significant expansion. These, players say, create direct demand for housing and commercial space for staff and affiliated businesses.

“The sector is expected to regain momentum, with GDP contribution projected to rise to 10 per cent by the end of 2026,” Chris Ochieng’, CEO of GulfCap Real Estate, told Real Estate.

This follows a period where the industry was marred by “elevated taxes on construction inputs, high interest rates and persistent inflationary pressure,” he said.

The projected rebound, however, hinges on navigating significant headwinds. Industry leaders cite political uncertainty ahead of the next general election in 2027, elevated financing costs, foreign exchange volatility, and chronic delays in critical infrastructure as key risks.

“The challenges and sector-wide risks include political uncertainty ahead of the general elections, elevated financing costs, an increase in costs for materials and inputs, forex risks, and delays in critical infrastructure linkages,” Ochieng’ said.

A central strategy for the sector’s revival is a decisive shift away from expensive, traditional bank debt. Developers are turning to capital markets and institutional investors to fund their project pipelines.

“We are implementing robust mitigation measures, such as diversified financing models, including private placements, REITs and sukuk instruments, to reduce reliance on traditional debt markets,” Ochieng’ explained.

A “private placement” is the sale of securities (like shares or bonds) to a select group of large, sophisticated institutional investors, rather than to the general public on the stock exchange.

“REITs” (Real Estate Investment Trusts) are companies that own, operate, or finance income-generating real estate, allowing individuals to invest in large-scale property portfolios.

This search for patient capital is particularly focused on the affordable housing segment, aligned with the government’s Affordable Housing Programme (AHP), which targets 250,000 new units annually. 

GulfCap, for instance, says it is finalising a portfolio of institutional projects like student hostels anchored on long-term sukuk financing.

“The financial instruments are structured to attract pension funds and Shariah-compliant investors seeking steady returns with tangible social impact,” Ochieng’ said.

The bullish outlook is also grounded in Nairobi’s resilient rental market; which executives describe as a foundational engine for investment.

“Nairobi remains one of Africa’s most attractive residential real estate markets, driven by strong tenant demand and consistent rental cash flows,” said Kenneth Mbae, Managing Director of Centum Real Estate.

Citing the 2024 Kenya National Bureau of Statistics (KNBS) report, Mbae noted that 88.8 per cent of Nairobi’s 1.66 million households are renters, paying an average of Sh12,000 per month. “This translates to roughly Sh18.4 billion in rent paid every month in Nairobi alone,” he said.

This demand-side strength, coupled with emerging buyer financing options like the Kenya Mortgage Refinance Company’s (KMRC) 9.5 per cent fixed-rate mortgage, is fuelling developer confidence for new residential projects.

The Kenya Mortgage Refinance Company (KMRC) provides long-term funds to mortgage lenders, enabling them to offer more affordable, long-term home loans to Kenyans.

“For investors, 2026 presents a compelling entry point to build long-term wealth through rental properties,” Mbae said.

Facing pressure to deliver units faster and more affordably, developers are deploying technology to tackle two chronic industry problems, including slow construction and opaque transactions.

To accelerate building, firms are adopting industrialised techniques. “GulfCap RE has adopted the use of Tunnel Formwork to ensure delivery of buildings ahead of schedule,” Ochieng’ said. This allows for quicker capital recycling into new projects.

“Tunnel Formwork” is a modern construction system using large, reusable steel moulds to cast entire room sections, walls and floors, simultaneously. It dramatically speeds up construction for repetitive floor plans, commonly used in apartment blocks.

Simultaneously, AI-driven project management systems are being implemented to “enhance delivery efficiency, optimise cost control and strengthen investor reporting,” he added.

Companies are rolling out digital sales platforms and real estate analytics tools.

“These tools will enhance market visibility, optimise pricing, and provide investors and homebuyers with real-time project tracking, reinforcing transparency and trust in an industry often constrained by information asymmetry,” Ochieng’ said. 

Furthermore, leading developers are consolidating their operations into integrated, turnkey models to control costs and quality across the value chain, from construction to property management.

A “turnkey model” means the developer manages the entire project from start to finish, including design, construction, and furnishing, so the client or buyer receives a property ready for immediate use. 

The consensus is that the sector’s 2026 prospects depend on this multi-pronged adaptation. Success is no longer seen as merely riding an economic cycle but as executing a strategic shift in how projects are financed, built, and sold.

“With the UN expansion in Kenya, strengthened government commitment to affordable housing... and accelerating county-level urbanisation, demand is expected to remain strong, particularly within the affordable, mid-income and institutional housing market segments,” Ochieng’ said.