Construction Sector Shrinks as Credit Falls to Ksh.528 B

Construction Sector Shrinks to an All-Time Low of 0.7% to Ksh.528 Billion

Kenya’s construction industry shrank to an all-time low of 0.7 percent in 2024, a reversal from the 3.0 percent growth in 2023 amid economic slowdown.

Loans advanced to the construction sector by commercial banks fell sharply to Ksh.528 billion in 2024, compared to Ksh.602.7 billion the previous year.

This credit squeeze, alongside rising input costs, is seen as a significant contributor to the sector’s contraction.

This has raised concerns over the viability of flagship projects such as President William Ruto’s Affordable Housing Programme.

The decline comes against the backdrop of an overall economic slowdown, with Kenya’s GDP growth easing to 4.7 percent in 2024, down from 5.7 percent the previous year, according to new data from the Kenya National Bureau of Statistics (KNBS).

Also Read: Courts Hand Ruto Lifeline in Affordable Housing Ruling

Despite expectations that the housing agenda would stimulate activity in the construction space spurring demand for inputs like cement and steel, cement consumption dropped by 7.2 percent to 8.54 million metric tonnes, while employment in the sector declined slightly from 226,300 in 2023 to 223,400 workers in 2024.

Inflation on construction materials and related inputs climbed to an average of 2.83 percent in 2024, up from 2.30 percent in 2023, exerting additional cost pressures on ongoing and planned projects.

In response to these headwinds, the government is considering measures aimed at easing production costs. But how?

One key intervention is the proposed reduction in Export Promotion Levies (EPL) on critical steel imports, as outlined in the Finance Bill 2025.

EPL was introduced in 2023 by President and had imposed a 17.5 percent levy on various steel products to discourage imports and promote local manufacturing.

And with the rising material costs and stalling construction activity, the government now plans to lower the levy to 5 percent on select semi-finished and semi-processed steel products, including hot-worked bars, rods, and hot-rolled flat iron products.

Treasury Cabinet Secretary John Mbadi thinks such a move would revitalize construction and manufacturing sectors by improving affordability and access to essential raw materials.

Mbadi says such a move will offer a timely boost to the Affordable Housing Programme, which has so far delivered its first 5,000 units to the public.

According to the government, over 500,000 Kenyans have already expressed interest in the initiative, which seeks to reduce the housing deficit while stimulating job creation and industrial activity.

However, with sector performance dipping and cost pressures mounting, stakeholders are watching closely to see if the proposed fiscal measures and policy realignments will be enough to reverse the downturn and reignite momentum in the construction industry.

May 9, 2025

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Collins Ogutu

Nairobi based Digital Journalist, Corporate Communication Expert and Digital Marketer with a wealth of experience in multimedia. Accredited member of the Media Council of Kenya.