Brick by Brick: Evaluating The Merit Of Real Estate As East Africa’s Favourite Asset
Across Uganda and Kenya, real estate is more than just an investment – it’s a symbol of identity, security and legacy. From gated communities in the suburbs of Kampala to Airbnb rentals on Kenya’s coast, the region’s property boom has been fuelled by a perfect storm of demand from demographics, tourism and the diaspora.
Yet beyond the towering apartment blocks and beachfront villas lies a more complex story, one marked by distrust, limited access to finance and speculation. As a result, unfinished structures and vacant units can be found across all the region’s major urban centres. Focusing on Uganda and Kenya, this article evaluates whether real estate truly deserves its position as the region’s most trusted and popular investment.
Key Drivers of the Real Estate Boom
Rapid urbanisation, and high population growth, lie at the heart of East Africa’s boom in real estate. The region’s largest city, Nairobi, recorded more than 225,000 new residents in the last year and is expected to house over 10 million people by 2050. Some estimates are as high as 15 million.
People who migrate to urban settlements in search of better livelihoods enter the middle-income bracket once this goal is realised. According to Uganda’s Ministry of Finance, Planning and Economic Development (MoFPED)’s 2021 Poverty Status Report, 56.56% of the nation’s middle class resides in urban areas, compared to the 31.52% living in rural areas. This trend becomes self-reinforcing as more people realise they have a better chance at upward mobility in towns and cities. Therefore, the country’s housing deficit is increasing by about 210,000 units annually, currently estimated at 2.4 million homes.
Additionally, the completion of major intracity infrastructure projects in recent years such as the Kampala-Entebbe Expressway and the Eastern Bypass in Nairobi, has opened new areas for development. These respective developments have facilitated improved accessibility of areas such as Kigo, just outside of Kampala, and Ruiru, on the outskirts of Nairobi. This has prompted investors to develop estates and satellite cities in these areas, notably the KSh 500 billion Northlands City in Ruiru.
The East African diaspora has also played a vital role in the regional economy. Remittances from abroad have become a significant source of capital for home construction and land acquisition. For instance, industry experts estimate that the diaspora is responsible for between 30% and 40% of demand in Uganda’s real estate market. Members of the diaspora are known to be an important part of “effective demand” – that is the ability and willingness to purchase these developments.
Market Trends
Certain macroeconomic headwinds look set to fuel further demand in the real estate markets of both Uganda and Kenya. The former expects to produce its first barrels of oil in 2026, creating a housing need for foreign expatriates, and their families. This is expected to be concentrated around Hoima and Kampala. Additionally, there is a multiplier effect on the wider economy from increased government revenue and jobs as the International Monetary Fund (IMF) forecasts increased growth for the country in 2025/26.
Similarly, Nairobi is set to play an even bigger role as a hub for the United Nations (UN) following the organisation’s cost cutting measures. As the organisation looks to decentralise its operations from New York and Geneva, notoriously expensive cities, it is set to add three new global offices in the Kenyan capital by the end of 2026 as well as a new assembly hall – the first built by the UN General Assembly since 1949 – as part of a $340m upgrade to the site in Gigiri. The current United Nations Office at Nairobi (UNON) already boasts over 6,500 staff and 11,000 families and dependants.
This will drive up demand for real estate in these respective cities. Commercially, the arrival of expatriates and diplomats will increase the need for conference facilities and office space. Residentially, the demand for furnished apartments and gated communities will rise as members of the diaspora tend to prefer large estates or apartments due to their security and lower maintenance costs.
Locally, there continues to be strong demand for, and a lack of supply of, low-cost housing. For instance, in Uganda, low-cost housing refers to homes priced below UGX 150m–$41,800 – while affordable housing falls within the range of UGX 150m and UGX 400m – $111,500. With interest rates generally upwards of 14%, and a GDP per capita of $1,072 – UGX 3.85m, affordable housing remains out of reach for most Ugandans.
Investment Vehicles and Emerging Models
Emerging Investment Vehicles are reshaping how investors engage in East African real estate. Real Estate Investment Trusts (REITs) – special purpose investment vehicles that own, operate or finance income-producing real estate across a wide range of property sectors – have recently taken off. They allow investors to earn income from real estate without the stress of having to buy, manage or finance properties themselves.
Broadly speaking, REITs can be categorised based on the kind of real estate they invest in as well as their purpose to investors, for example income and development. For example, Acorn’s Student Accommodation Development REIT (ASA D-REIT) raised $700m in blended financing from institutional investors and Stanbic Bank Kenya. Over the 18-year life of this transaction, the ASA D-REIT seeks to develop 35 affordable student housing units, adding over 48,000 beds to Acorn’s portfolio. This reinforces the company’s position as the largest developer of purpose-built student accommodation in Africa.
REITs have proven popular among retail investors in Kenya. The first REIT to list on the Nairobi Stock Exchange (NSE) was the ICEA Lion Asset Management (ILAM Fahari REIT), and it began trading publicly in 2015. Ultimately, the REIT was delisted in 2024 and over 4,000 retail investors retained their investment in the fund, despite the restructuring’s aim to edge out non-professional investors.
On the digital front, Airbnb has transformed the property market of Kenya’s coast. In Mombasa, hosts average USD 3,264 annual revenue with 29% occupancy and USD 58 nightly rates. This opportunity has sparked nationwide interest with the question “What is Airbnb?” among the top searches on Google in Kenya as Airbnb listings around the country exceed 10,000. The affordability of the platform has seen it successfully challenge hotels within the hospitality sector in Uganda. Occupancy rates reached 43% in 2023, as hosts on average earned $273 a month.
Risks, Challenges and Opportunity Costs
Despite its appeal, East Africa’s real estate sector has significant risks and challenges the most notable being what industry experts refer to as “the silent crisis” of African real estate; data. Public records are incomplete or inconsistent since in many African countries, most land transactions happen informally. Property records are kept on paper, making them inaccessible and easy to manipulate.
Further complications arise from the history of land ownership in the region, which went through three distinct phases: pre-colonial, colonial and post-independence. For example, in Uganda, the country’s history has produced four different systems of land tenure: Mailo, Freehold, Leasehold and Customary occupancy systems. These vary across regions in the country and have caused confusion and conflict.
Furthermore, the informality of land and property sales has made it difficult to determine property ownership. This has constrained financing within the sector as land and property becomes riskier collateral for banks. As a result, home ownership and property development are restrained. Additionally, significant levels of informal sector employment have made it difficult to assess workforce creditworthiness, due to the irregularity of their earnings. For example, approximately, 91.9% of Uganda’s employees are working in the informal sector.
Lastly, it is important to compare the returns offered by investing in real estate with other asset classes, in this case Ugandan treasury bonds. The figure below relies on a model developed by Alex Kakande, a Ugandan financial analyst, over a 15-year duration with an initial UGX 250m investment in a rental property in Kira – a town on the outskirts of Kampala. The property brings in around UGX 24m annually in rent after the first year. This is then subject to a 12% rental income tax while other costs after tax are assumed to add up to 5%. The model factors in an annual growth rate of 6% in the rent with the land estimated to have appreciated in value to UGX 1b after 15 years.
On the other hand, the return on a 15-year Ugandan government treasury bond has been computed, with the annual coupons reinvested. Coupon rates are assumed to remain high, with the assumption of a minimum return of 12% per annum. While many assume property offers superior returns, this analysis shows that treasury bonds deliver better cashflow and a higher total return to investors.
Figure 1: Comparison of Real Estate versus Treasury Bonds over 15 Years. Source
Conclusion
Real estate may be East Africa’s favourite asset, but sentiment alone cannot sustain this trend. Without better data, financing and land governance; its potential risks being unrealised. To compete with the concrete returns offered by alternative investments such as high yield government bonds, the sector must evolve.
