47% of Kenya's Real Estate Firms Operate Without Professional Registration

According to the recently released 2023-24 Real Estate Survey conducted by the Kenya National Bureau of Statistics (KNBS), a substantial portion of Kenya's real estate sector operates without adequate regulation.

The report, which surveyed the industry from March to May 2024, reveals that 47.1 percent of real estate firms in the country lack registration with any professional or regulatory institutions. This regulatory gap has contributed to a rise in customer complaints and financial losses among Kenyans. In contrast, the survey indicates that 52.9 percent of real estate firms are registered with professional bodies.

The majority of these firms are affiliated with the Estate Agents Registration Board (88.1 percent), followed by the Valuers Registration Board (40.7 percent) and the Kenya Valuers and Estate Agents (33.9 percent). However, the fact that nearly half of the firms remain unregulated raises considerable risks for consumers, exposing them to potential fraud and mismanagement. The report identifies several reasons for the lack of registration among unregulated firms.

Notably, 33.6 percent of these firms express a lack of interest in registration, while 31.8 percent do not perceive it as necessary. Additional barriers include perceived complexities in the registration process (10 percent), ineligibility for registration (6.4 percent), views of regulations as excessive (4.6 percent), and high costs associated with registration (3.6 percent).

The real estate sector plays a vital role in Kenya’s economy, contributing an average of 8.9 percent to the country's gross domestic product. From 2019 to 2023, the sector experienced a remarkable output growth of 33.7 percent, reaching Sh 1.26 trillion. This growth has been driven by infrastructural developments, urbanization, attractive investment returns, and government initiatives aimed at promoting affordable housing.

Despite this expansion, the real estate sector has not been without its challenges. The Competition Authority of Kenya (CAK) reported an increase in consumer complaints within the sector in the year leading up to June 2023. Issues reported include instances where companies failed to fulfil development commitments after collecting substantial payments from customers, alongside rising loan default rates, which have led to intensified recovery efforts from financial institutions.