Kenyans buying apartments before construction begins are earning average annual investment returns of 18.06 per cent, outperforming property investors in several major international markets, according to a new HassConsult study.
The findings highlight the growing appeal of Nairobi’s off-plan property market, where buyers commit to apartments before completion, pay in instalments and potentially benefit from rising property values as construction progresses.
The report, International Investment Outperformance: The Kenyan Residential Property Market, examined eight Nairobi residential developments marketed between 2019 and 2023 and compared their performance with eight international markets, including the United States, Britain, France, Switzerland and Canada.
Its central finding is that Kenya’s off-plan buying model generates returns that conventional property price indexes may fail to capture.
Unlike traditional developments, where developers finance construction before selling completed units, Kenya’s off-plan model allows buyers to commit money before a project is finished.
Buyers typically pay deposits of between 10 and 30 per cent, followed by instalments linked to construction milestones.
This arrangement gives developers access to financing while allowing buyers to secure apartments at agreed prices before completion.
The study describes the approach as a “sell-to-build” model that establishes demand before and during construction.
It argues that this structure helps address one of the construction industry’s biggest challenges: cash-flow shortages.
“Construction and development have the highest bankruptcy rate of any sector, felled repeatedly on poor and delayed cashflow,” the report states.
For investors, the potential gains come from securing an early purchase price, benefiting from capital appreciation during construction and earning rental income after completion.
HassConsult found that one-bedroom apartments delivered the strongest capital appreciation among the units examined.
Across four developments purchased in 2019, one-bedroom apartments appreciated by an average of 47.25 per cent by the time of sale.
Two-bedroom units gained 33.2 per cent, while three-bedroom apartments appreciated by 25.9 per cent.
The gains compared with an 18.66 per cent increase in prices across the wider completed-apartment market over the same period.
Escada, located on Rhapta Road in Westlands, recorded particularly strong performance, with one-bedroom apartments appreciating by 78 per cent.
The findings suggest that smaller apartments offered stronger price growth in the selected developments, although performance varies depending on location, design and market demand.
Capital appreciation was only part of the investment equation.
Across five completed off-plan developments purchased in 2019 and 2020, unfurnished one-bedroom apartments generated annual rental yields ranging from 11 to 19 per cent, averaging 14 per cent.
That was almost double Kenya’s overall apartment rental yield of 7.28 per cent recorded over the 2019–2025 period.
Combining rental income with annualised capital appreciation, HassConsult calculated average annual investment returns of 18.06 per cent.
“Together, the unfurnished rental yields and annualised capital appreciation for these offplan investments amounts to an average return on investment of 18.06 per cent per year,” the study states.
The report says the performance exceeds returns in South Africa by 30 per cent and is two to three times those recorded in several other international property markets.
However, the 18.06 per cent figure should not be confused with a guaranteed return or the profit earned on a buyer’s initial deposit. Investors’ actual returns depend on the amount paid, financing costs, taxes, maintenance and rental occupancy.
The COVID-19 pandemic tested the resilience of Kenya’s property market as job losses, salary cuts and economic uncertainty affected household purchasing power.
Some prospective buyers reconsidered their commitments, while developers faced pressure to maintain construction schedules.
Nevertheless, HassConsult found that the market remained resilient, with buyers increasingly favouring developers with established track records and visible construction progress.
“Beyond the immediate shock caused by the pandemic, buyer defaults in Kenya’s offplan developments continue to be minimal,” the study states.
The report, however, warns that projects can still fail where developers underestimate demand or lack proper financial planning.
It notes that developments “can still founder where they are insufficiently anchored in strong demand studies and financial planning.”
The expansion of Kenya’s middle-income and high-income population has helped support demand for residential property.
According to Kenya National Bureau of Statistics data cited in the HassConsult study, the number of Kenyans earning more than Ksh100,000 monthly increased from fewer than 100,000 in 2016 to nearly 400,000 by 2023.
Bank employees were among the early buyers after lenders introduced staff mortgage schemes in 2012. Professionals in education, healthcare, trade and agriculture subsequently expanded the pool of potential buyers.
The report also points to the difference between renting larger homes and purchasing apartments.
Average monthly rent for detached houses stands at Ksh238,219, while apartments sell for between Ksh5 million and Ksh15 million.
For many salaried Kenyans, remaining in rented accommodation while paying for an apartment through instalments offers a route to property ownership without immediately purchasing a larger home.
Despite the attractive returns, buying off-plan apartments in Nairobi carries significant risks.
Construction delays, developer insolvency, title complications and weaker-than-expected rental demand can undermine projected profits.
The study’s findings are also based on eight selected developments and should not be treated as a guarantee of performance across the entire Nairobi real estate market.
Investors need to assess a developer’s track record, ownership documentation, project financing, location and potential rental demand before committing money.
HassConsult’s broader conclusion is that Kenyan residential property has delivered stronger returns and greater price resilience than several international markets.
For buyers, however, the opportunity is not simply about paying a deposit before construction begins. It is about identifying a credible developer and a property with sustainable demand.
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