How Interest Rates Affect Real Estate
Interest rates play a vital role in steering the economic growth of a country. About three years ago, the amended Interest Rate Cap law in Kenya come into effect aiming to make credit affordable to what they called “the common mwananchi”. The law aimed to put a ceiling lending rate by banks to at a maximum of 4% above the central bank base rate.
A lot has happened in the Kenyan economy since then. Economists have argued that perhaps the law has highly contributed to the slow growth of the economy. One of the sectors that has been highly affected is the real estate sector. A recent research by the central bank has shown that ever since the Act come into place the number of mortgages issued has drastically reduced as banks are shunning away the high risk borrowers.
The ripple effect of this that the sector will slow down. Many projects have been delayed, left incomplete or those that have been completed on time left unoccupied for a longer period of time.
Then in the past few days, legislators have reopened the talk of the Interest Rate Cap Act. Some are for it while others are against it. But is it time we the borrower and the lender for the sake of the sector or the economy in general? This is defiantly going to be an interesting debate and an item to watch in the coming days.
Any wrong decision will cost you money, avoid losing money consult us for the best advise on matters Real Estate.This however was officially revised on the November 8th 2019.
Janet R. W .Ndwiga-Author
