The cost of building a house in Kenya has risen by 45 percent since 2021, with industry stakeholders attributing the increase to the global high cost of living. Reasons for this increase include currency devaluation that saw the Kenyan shilling shed at least 23 percent in value against the US dollar, pushing up importation costs and high fuel cost, impacting production and transportation.
For instance, the cost of diesel which is key in our production has risen by Sh70 shillings since 2021, affecting electricity costs too. Transport costs have increased by 45 percent, with a litre of petrol rising from Sh129.70 in December 2021 to a high of Sh200 in 2024.
The latest industry data by Integrum, a construction consortium and management firm shows construction costs average Sh48,750 to Sh122,860 per square meter for residential, commercial, retail and industrial buildings. This translates to around Sh4,529 to Sh11,414 per square foot.
In 2021, the standard cost of building a square meter in the country was Sh33,650. This means the average cost per square meter has increased by at least Sh15,100 in the past three years.
The building rates are from the survey conducted between October 2023 and April 2024. The survey blames the increase on frequent and unpredictable changes in Kenya's tax policies through 2023 and 2024. Example given is the Export and Investment Promotion Levy of 10 and 17.1 percent charged on the costume value of various imported goods, including key construction materials like steel.
The survey adds that, though it is touted to boost local manufacturing, it has inadvertently driven up the cost of imported building materials, thereby inflating construction expenses.
Adjustments in the Turnover Tax have further compounded the financial burden on mid-sized construction firms. The upper threshold was slashed from Sh50 million to Sh25 million, while the rate was hiked from a percentage to three percent, the report by Integrum reads.
This move, the report says has effectively amplified the tax liabilities of those companies, consequently constricting their project cash flow. The Finance Act, of 2023 that was squashed by the Court of Appeal as unconstitutional introduced a 17.5 percent levy on imported clinker, a key raw material for cement production. Although the levy was meant to encourage domestic production, it has had the opposite effect.
As a result, the volume of imported clinker declined sharply from 650,000 metric tonnes in 2022 to 148,000 the following year. Similarly, imports of iron and steel, also affected by the levy - dropped from 1.4 million tonnes to 1.21 million tonnes in 2023.
Accordingly, it costs Sh50,840 to Sh78,200 to build a square meter in the Coastal region, Sh47,850 to Sh84,000 in Nairobi and Mount Kenya region while those in Western and Nyaza Kenya are parting with Sh50,840 to Sh87,250.
Using the 2024 construction rates for a standard bungalow, it will cost you Sh3.9 million to Sh4.4 million to put up the building in the Nairobi or Mount Kenya region. The same building will cost you between 4.06 million to Sh4.6 million at Kenya's Coast while the construction costs in Western and Nyanza add up to Sh3.9 million to Sh4.5 million.
A three-bedroom house that takes a plinth area of between 100 to 140 square metres will cost you up to Sh6.9 million in Nairobi and Mount Kenya region, Sh6.9 million in Western, and between Sh5 million to Sh7.1 million at the Coast.
Adopted from The Star Newspaper
