Construction sector rebounds after a lull to lift struggling economy

For years, Kenya’s booming construction sector was a bellwether for the economy, earning the country a reputation as a perpetual big construction site during the administrations of Mwai Kibaki and Uhuru Kenyatta. 

This was not the case last year, when the sector slumped into contraction for the first time in years, dragged down by a credit crunch and developer struggles.

But in an unexpected turnaround, the widely controversial and rejected stone – President William Ruto’s ambitious affordable housing programme – is now proving to be the cornerstone of a battered economy, helping to pull the crucial construction sector out of its slump.

World Bank officials this week expressed surprise at the sector's recovery, which they linked directly to the acceleration of the State-backed housing initiative.

This surge has provided a counterweight as other sectors of the economy face significant headwinds.

"Two things can be true at the same time. The coin always has two sides," Jorge Tudela Pye, the World Bank's Country Economist for Kenya, said this week, encapsulating the dual narrative of Kenya's economy.

On one side, the World Bank's latest Kenya Economic Update points to a "notable surprise" in the recovery of construction, which grew by 4.3 per cent in the first half of 2025 after contracting in 2024. 

This rebound, the report notes, is "driven by increased cement consumption," which has coincided with the ramping up of the government's flagship affordable housing programme.

This public investment has provided a vital stimulus at a time when private sector activity has faltered. 

Official data from the second quarter of 2024 had painted a grim picture: a 2.9 per cent contraction in construction, a 7.8 per cent fall in cement consumption, and a sharp deceleration in bank lending to the sector.

The programme, a pillar of Ruto's political platform, was initially met with fierce resistance. It was started by former President Uhuru Kenyatta, with Ruto as his deputy.

Kenyans protested that the President was draining pay slips via a compulsory housing levy to fund the construction of so-called affordable houses that ordinary citizens could not afford. 

Critics warned that by 2027, the project could collapse, leaving the country littered with ghost buildings.

Yet, the government has pressed on. In his State of the Nation address last week, Ruto declared that "across the country, we are delivering the most extensive housing rollout in our history: 230,000 affordable homes." 

He detailed a programme that has become a "national empowerment engine," creating over 428,000 jobs in roles ranging from architects and engineers to masons and steelworkers.

On the global stage, at the United Nations General Assembly in September, Ruto amplified this message, announcing that nearly 170,000 units were under construction, creating 320,000 jobs—a number he said would soon double to 650,000.

The government has enacted the Affordable Housing Act of 2024, established a dedicated fund, and made public land available to cut costs. The Kenya Mortgage Refinance Company is also providing concessional mortgages, aiming to make ownership a reality for low- and middle-income families.

However, the recovery appears lopsided. While public-backed affordable housing sprouts in every corner of the country, offering low-income jobs and boosting demand for cement and steel, traditional real estate players are reporting a slowdown. 

The World Bank notes that while total employment has grown, almost all growth has been in informal, "lower quality jobs," with formal wage employment growing at less than one per cent annually over the past decade.

The report also highlights persistent fiscal vulnerabilities. Government revenues have consistently missed targets, forcing more borrowing and deepening public debt, which stands at 68.8 per cent of GDP. 

For ordinary Kenyans, the economic gains feel distant; the World Bank found the average real wage per worker has plummeted by 10.7 per cent in the last ten years.

This underscores the challenge for Ruto: the construction sector's revival, driven by his controversial policy, is providing a crucial boost to GDP growth—projected to reach 4.9 per cent in 2025—but it has yet to translate into the widespread, high-quality employment demanded by Kenya's vast and restless youth population, known as Gen Z.

The affordable housing programme, once the rejected stone of Ruto's agenda, has undoubtedly given the construction sector—and by extension, the macroeconomy—a much-needed shot in the arm. 

But whether this state-driven momentum can be sustained and can catalyse a broader, more inclusive economic revival remains the critical question for Kenya's future, as captured by the World Bank.