Commercial banks increased funding for the building and construction sector by a double-digit rate during the first quarter of the year, signalling a rise in new commercial and residential housing projects, and resumption of stalled works.
Credit to the sector grew by 14.35 percent to Sh153.8 billion in March, up from Sh134.5 billion last December, bucking a trend where fresh loans to the private sector in the review period contracted for second year running.
Building and construction was the sole major economic sector with a double-digit or Sh19.3 billion growth in gross loans in the review period, according to data published by the Central Bank of Kenya (CBK).
The increased flow of credit towards construction and renovation of buildings marks a rebound from the first quarter of last year, when commercial banks cut lending to the sector by 4.19 percent to Sh137.3 billion.
The sector had the highest default rate in the 12 months ended December 2024, with Sh52.1 billion, or 37.21 percent, of the total loans non-performing, pointing to deepening cash flow challenges.
The reduced flow of loans to the sector in the last two years, coupled with budgetary cuts for infrastructure projects like roads in the private sector, resulted in the fastest year-on-year drop in uptake of cement in at least two decades.
“...the volume of imported iron and steel decreased by 8.9 percent to stand at 1,101.1 thousand tonnes in 2024,” the Kenya National Bureau of Statistics (KNBS) wrote in the 2025 Economic Survey in May.
“In addition, the number of residential housing units completed by State Department for Housing declined from 3,357 units in 2023 to 1,655 units in 2024.”
The activities in the sector, however, appear to have started the year in a recovery mode, going by the Sh19.3 billion growth in credit in the first three months, the CBK data shows.
For example, consumption of cement, a key input in the building and construction industry, grew 20.69 percent in the first quarter of the year to 2.34 million tonnes, according to data collated by the state-owned statistician.
The increased lending to the sector came in a period when credit to the private sector contracted a marginal 0.52 percent quarter on quarter closing March at Sh3.84 trillion, compared with Sh3.86 trillion in December 2024.
Apart from building and construction, the other sectors where banks increased loans were funding against consumer durables which rose 4.82 percent to Sh449.9 billion, while credit to ‘other activities’ climbed 14.7 percent to Sh131.5 billion.
Major economic sectors such as manufacturing, trade, real estate as well as transport, and communications recorded a cut in gross loans, according to the CBK data.
The output in the sector had dropped 0.7 percent last year, one of the worst performances in more than two decades, mirroring a slowdown in projects in the public and private sector.
“The recent fiscal policies have stifled this grassroots demand. By imposing a tax of over 35 percent on the importation of cement clinker and steel billets, lawmakers have inadvertently choked a crucial segment of the economy,” Antony Mwangi, a public policy consultant wrote in an article published by the Business Daily in March.
“This decline [in the construction sector] is not primarily attributed to large-scale commercial projects…. [but also] the everyday investments by Kenyan households-individuals purchasing two or three bags of cement to improve their dwellings.”
