Login

Read Articles

How Trump’s policy could hurt our real estate sector

Article Icon

American President Donald Trump is just a few weeks in office. However, in that short time, some of his policy pronouncements are sending shivers down many nations. His much publicised immigration policy is of great concern to Kenya’s real estate sector. For ages, America was a country that welcomed all sorts of people, be they legal immigrants or otherwise. With such an extensive labour force in all sectors of the economy, the non-resident workers have contributed a significant portion not only to the growth and expansion of America’s wealth but to their home countries’ economies through external remittances. According to Novatti, the global software technology company that offers systems integration to the global payments network, remittances made by these workers have made the United States become the world’s largest sender of such funds. It estimates such global remittances at $135 billion, or close to Sh13.9 trillion.

In the year to June 2016, Kenya received about $1.7 billion (Sh173 billion), thus making diaspora remittances Kenya’s main source of foreign cash in recent years. A huge chunk of this remittance is channelled towards the thriving real estate sector. And this is where Trump’s immigration policy matters. In his “America First” mantra, Trump has vowed to deport millions of undocumented immigrants from the US in a move some fear could also limit the amount of remittances out of that country. It is estimated that there are about 30,000 undocumented Kenyan immigrants in the US. So, should Kenya’s property market catch a cold when Uncle Sam sneezes? The answers vary. According to Alex Muema of Ndatani Entreprises, those in the US illegally have many reasons to fear out of the Trump declaration. He sees a two-fold scenario that can affect how those in the US handle their hard-earned cash. “We may see a spike in remittances from America as some seek safe havens for their cash and seriously consider home investments. On the other hand, such an action may see remittances dwindle in the medium term. It all depends on the timelines for implementing the new immigration policy,” he says. The question is of special interest to George Wachiuri, the CEO of Optiven Real Estate. Kenyans in the diaspora make up 30 per cent of his company’s investors with those in the US making a significant portion. However, Wachiuri is quick to point out that we may only be focusing on Kenyans in the US while other countries have sizeable populations of Kenyans too. “Apart from the US, we have managed to talk to Kenyans in Canada, United Kingdom, Australia and even South Africa through our regular campaigns,” says Wachiuri. He would only term the Trump policy a challenge to his business if he were to lock or tax the remittances. Formal channels “Of the estimated Sh156 billion annual remittances to Kenya, 46 per cent comes from the United States and Canada. These funds are transferred through formal channels, meaning there are more funds sent through informal channels. If the formal channels are blocked or taxed, it means a lot more money will be sent through the informal channels and either way it will get to the property market,” says Wachiuri.

Wachiuri adds that Trump’s immigration policy will not only affect Africa but will be a real global risk as well. “We are waiting to see the effects of this policy. For sure, it will have an effect on the real estate industry,” he said. In any case, says Wachiuri, the real estate sector in Kenya also attracts private equity funds pooled by conglomerations of investors who may be averse to risks posed by Trump’s immigration policy.

Cytonn Investments is another company that has been closely monitoring the post-election situation in America, especially the country’s foreign policy guided by Trump’s “Make America Great Again” slogan. Three weeks after Trump’s election, Cytonn released a report in which it dissected the various factors that will shape America’s global policy as far as doing business is concerned. Among those that may affect Kenya’s real estate sector include America redirecting focus from the global arena to dwelling mostly on the local economy, stringent immigration laws and deportation of illegal immigrants, as well as renegotiating global trade deals seen as punitive to the US. While stating that we should prepare for “a bumpy ride”, the company, though, is not worried about any perceived dwindling fortunes in the property sector owing to Trump’s immigration policy. “The Kenyan economy is one of the most diversified in the region and has displayed resilience to global shocks, as witnessed by the IMF projecting a six per cent growth for 2016, despite other African countries being downgraded on account of global turbulence, especially due to commodity prices,” says the report. According to Cytonn, key hindrances to Kenya’s growth are internal: security, political stability, corruption, and weak export growth. The company even sees a silver lining in the dark cloud of the hugely unpopular immigration policy. “We see the Trump effect to have a positive impact on security and governance, and neutral on trade and investments,” it added. initiatives With the Trump presidency barely two-months-old, only time will tell whether his new policies will stimulate or spell doom to Kenya’s otherwise resilient property sector.


by: Peter Muiruri
14 Mar 2017
main


Comments:





Other Articles Article-Library:
Article Icon

Tanzania: Real Estate Law Coming, Says Minister

Dodoma — The minister of Lands, Housing and Human Settlements Development, Mr Wlliam Lukuv ..
| read more

( 36 days ago. )
Article Icon

Top 10 questions to ask tenants

These questions can help you screen tenants before taking the time to check up on referenc ..
| read more

( 36 days ago. )
Article Icon

Real estate battle switches to ‘live, work and play’ projects

NAIROBI, KENYA: A few metres from the junction of Lower Hill Road and Haile Selassie Avenu ..
| read more

( 36 days ago. )
Article Icon

Kenya- House developers forced to lower their asking prices due to glut

NAIROBI, KENYA: Kenya’s real estate market is showing signs of cooling down after years of ..
| read more

( 187 days ago. )