Wednesday 26th August, 2026 12:37 AM|
Rising government borrowing and currency volatility are choking capital flows to Kenya’s housing market, pushing homeownership further out of reach for millions.
Kenya’s real estate sector faces a mounting threat from the country’s deepening debt crisis, according to a new report from LEAF Africa. The continent’s public debt expanded by more than 250 per cent between 2008 and 2024, surging from Ksh 66.08 trillion ($510 billion) to Ksh 237.11 trillion ($1.83 trillion), with Kenya among the ten countries accounting for roughly 72 per cent of this debt.
Real Estate Investment in Africa report, which examines Africa’s debt landscape, warns that the borrowing costs for African economies are among the highest globally, averaging 8 per cent to 15 per cent compared with just 2 per cent to 3 per cent in advanced economies. For Kenya, this translates into a crippling reality for the real estate market.
The LEAF Africa report identifies a critical mechanism through which government borrowing stifles real estate growth: the crowding-out of private lending.
“When [a] government borrows heavily from local markets, domestic borrowing crowds out private lending [and] banks become less willing to lend to start-ups and small businesses,” the report reads.
This effect is particularly damaging to the housing market. As banks channel capital into government securities, which offer high, risk-free returns, they become less willing to extend mortgages to homebuyers or construction financing to developers. The result is a deepening of Kenya’s housing deficit, which already stands at an estimated 2 million units.
The report states: “Foreign exchange volatility and rising debt service will crowd out public investment.” It advises investors to “seek resilience in supply chains, pricing, and funding. Deeper local integration is a strategic hedge.”
Domestic debt crisis
The report notes a significant structural shift in Africa’s debt composition
“While external borrowing still dominates the borrowing mix of economies on the continent, a notable shift has occurred where domestic debt’s share has risen from 30 per cent in 2017 to more than 40 per cent in 2022.”
This shift means the Kenyan government is increasingly competing with its own citizens and businesses for capital, driving up interest rates across the board. For prospective homeowners, the effect is devastating. With mortgage rates already above 14 per cent, the rising cost of domestic borrowing further tightens access to housing finance.
The LEAF Africa report uses Ghana as a stark warning. When Ghana defaulted on its debt in 2022, the consequences were severe.
“Venture capital (VC) slowed. International VCs delayed investments due to macro uncertainty. Bank loans priced out start-ups. SME lending rates rose above 35 per cent, making bank financing almost impossible,” LEAF Africa says.
The report cites Complete Farmer, a Ghanaian agri-tech platform that struggled to secure funding in 2023.
“Despite a strong business model, investors demanded higher equity stakes or reduced investment sizes due to Ghana’s default risks,” the report notes. It further quotes CEO Desmond Koney, who observed that “macro risk, not company fundamentals, became the main barrier to growth.”
For Kenya, the risk is similar. If the country’s debt burden continues to rise, investors may demand higher premiums, further increasing borrowing costs for developers and homebuyers.
What does this mean for Kenyan homebuyers?
Currency depreciation, exacerbated by ballooning external debt, further complicates Kenya’s real estate market. When governments owe billions in foreign currencies, a weakening local currency increases the cost of debt servicing. This often forces governments to print more money or hike taxes, fueling inflation and eroding the purchasing power of potential homebuyers.
The report emphasises that Africa’s debt challenge is becoming more complex, not less, affecting currencies, business costs, investment returns, public spending, and long-term growth. The LEAF Africa report offers specific guidance for investors navigating this challenging environment:
“Focus not just on debt levels, but debt mix, currency structure, and repayment terms. Build domestic capital markets to reduce external exposure. Differentiate between creditworthy borrowers and structurally exposed ones. Avoid blanket ‘Africa risk’ views; country risk is highly nuanced.”
For Kenya, the report identifies that infrastructure expansion remains a major driver of property growth, with Nairobi’s satellite towns growing 20 per cent to 30 per cent faster due to improved connectivity.
This suggests that despite the debt crisis, opportunities exist in peri-urban and infrastructure-linked zones where land remains relatively undervalued.
For ordinary Kenyans, the debt trap translates into a simple reality: homeownership is becoming increasingly unattainable. While the LEAF Africa report does not provide specific Kenyan mortgage statistics, the macroeconomic conditions it describes- high government borrowing, rising interest rates, and currency volatility- directly constrain access to housing finance.
As the report notes, the future of Africa’s cities “depends not just on building houses, but on building a sustainable financial foundation to support them.” For Kenya, that foundation remains dangerously fragile.
