Why banks are eying more auctions on loan defaulters
Real Estate
By
Brian Ngugi
| Dec 04, 2025
Commercial banks are planning to intensify property seizures and recovery efforts, a newly released Central Bank of Kenya (CBK) survey showed.
This comes as the lenders project a sharp rise in loan defaults led by the construction sector and individuals, signaling a potential slowdown in real estate activity.
The latest Credit Officer Survey from the CBK covering the quarter ended September 30, 2025, reveals that while the banking sector's gross loan book grew 2.7 per cent to Sh4.26 trillion, distress in key areas is deepening.
Banks expect non-performing loans (NPLs) to increase most prominently in the personal and household sector, a trend often exacerbated by Christmas-related spending.
READ MORE
Motorists to enjoy Sh2 fuel discount in latest Safaricom-Vivo Energy partnership
Transporters hit as port's empty containers backlog crisis worsens
Report: Public debt burden locks Kenyans out of health, education
State to heed ruling on new coffee payment system
Experts: Governance gaps hindering growth of blue economy
Private sector expansion fuels fastest job growth in over 2 years
Dubai, United Arab Emirates, March 2018 - Aerial view of Dubai Frame
MKU inks training deal with Abu Dhabi Maritime Academy
Developers push for local assembly of escalators, elevators
Why Kenya Power has scrapped manual applications for new electricity connections
“Respondents indicated that the level of NPLs is expected to remain constant in nine economic sectors but increase in the personal and household sector and decrease in the Trade sector during the next quarter,” said the survey’s findings.
“For the quarter ending December 31, 2025, banks expect to intensify their credit recovery efforts in eight economic sectors. The intensified recovery efforts are aimed
at improving the overall quality of the asset portfolio.”
The construction and real estate sector is a major concern, according to the survey’s findings, with 32 per cent of banks projecting a rise in bad loans.
"We are entering a phase of intensified asset seizures, particularly in real estate, to protect our portfolios," a senior credit officer at a major bank, who declined to be named as they were not authorised to speak to the media, told Real Estate. "The cycle of defaults is accelerating."
Analysts say the surge in projected construction sector defaults points to a broader downturn, where developers struggle to repay construction loans as sales slow, and potential homeowners fail to secure financing or complete purchases on new units.
This logjam threatens to stall projects and increase the inventory of repossessed properties.
In response, 81 per cent of lenders plan to intensify recoveries—including auctions—in the building and construction, real estate, and personal and household sectors this quarter.
The sector's overall gross NPL ratio eased slightly to 16.9 per cent in September from 17.6 per cent in June, helped by growth in the total loan book.
Yet underlying pressures are forcing a more aggressive recovery stance.
This comes as banks enjoy robust liquidity, with 86 per cent reporting an improved position.
Most plan to deploy this into new private sector lending (29 per cent) and government securities, highlighting a simultaneous push for growth while fortifying against bad loans.
The CBK survey included 38 commercial banks and one mortgage finance company.