The Trend in Construction Industry in Kenya

The building industry in Kenya has been on a rollercoaster ride in recent years. If you have been paying close attention to the sector, you can see that what appears to be an unstoppable growth engine is not, in fact, so. Those figures speak volumes- one that is both resilient and vulnerable in equal parts as concerns this important economic sector.

From the figures in a Knight Frank Kenya Market Update Report, which were released in August 2025, we realize that this is a sector that is rebuilding itself after a tough patch. The telling number is that the construction sector shrank by 0.7% in 2024 compared to improving by 3% in 2023. This is where it will get interesting, though-early signs point to 2025 as being the start of a potentially dramatic turnaround.

The Numbers Don’t Lie—A Tale of Two Halves

Cement Production and Consumption as Industry Barometers

In their pursuit of determining the direction that the industry is taking, construction professionals usually turn to cement figures. It is as though it takes the pulse of the sector as a whole. A close examination of the statistics indicates a fascinating story, other than mere supply and demand factors.

Based on recent occurrences, cement production has been characterized by high levels of volatility in recent years. In 2019, it saw about 6,200 metric tonnes being produced, which slowly increased to about 7,400 metric tonnes in 2020. The trend resumed an upward course, and in 2021 and 2022, it reached highs of close to 9,500 metric tonnes. Nevertheless, 2023 was a turning point as the production level dropped to around 9,200 metric tonnes, and then a more substantial decrease occurred in 2024 when approximately 8,500 metric tonnes of production occurred.

Of interest is how cement consumption has taken on a somewhat different trend. The consumption statistics offer a picture of an industry that may have been too rosy about its production calculations. The consumption was relatively close to production in 2019, with 6,100 metric tonnes being consumed. The disparity has increased dramatically since 2021, when consumption was estimated at 8,900 metric tonnes, compared to an estimated 9,500 metric tonnes of production.

In Kenya, Cement consumption dipped 12.7% YoY to 1,949,900t in the 4M24 against 2,234,200t in the 4M23 as per the Kenya National Bureau of Statistics. This decrease caused significant worries in the construction activity in the country. Nevertheless, the recent statistics indicate a possible turnaround with cement consumption growing by 27% year on year in January 2025 and even growing by 4 percent in December 2024.

The Building Plans Approval Rollercoaster

The value of approved building plans may serve as a better indicator of the industry volatility. This figure is basically what is under construction in the pipeline- those construction projects that have been positively approved to be carried out.

The figures tell a rousing tale. The value of approved building plans increased steadily, starting at approximately KES 200 billion in 2019 and reaching about KES 165 billion in 2020, given the repercussions of the pandemic. The actual spree began in 2021 and 2022 when the approval reached about KES 175 billion and KES 230 billion, respectively.

Then came the crash. In 2023, there was a massive decline in approved building plans, with the figure standing at approximately KES 225 billion, and in 2024, there was even a more dramatic decline to about KES 70 billion. The second quarter of 2025 returns a relatively higher amount to approximately KES 45 billion, but this is still far short of what was experienced in high years.

The significant decline in the number of approved construction plans is a strong indication of how much the market and investor confidence are deteriorating. In a worsening market, when developers cease to file plans to be approved, generally one or more of the following is at hand: difficulty in financing, doubt as to the demand, or anticipation of a brighter day.

Understanding the 2024 Contraction—More Than Just Numbers

The Perfect Storm of Challenges

The -0.7% growth rate in 2024 was not a mere statistical anomaly- but rather, the culmination of several factors combining that placed the construction industry in a difficult position. The growth and survival of the construction industry in Kenya in 2024 has been a tale of resilience, slow but sure growth, and survival. Supported by massive investments in infrastructure and housing, the sector has made progress, notwithstanding economic challenges in the form of high costs and poor credit supply.

Concerns regarding raw materials, especially cement, have been one of the greatest factors. The scarce supply has also led to a rise in the price of clinker and, consequently, the cement production. The locally produced clinker, as players in the industry have indicated, used to go at a price of 50 US dollars per tonne. However, it has recently zoomed to $130. This is more than a 160 percent rise in a key input cost, and this essentially transforms project economics all around.

The shortage of clinker could not be explained only by the supply and demand factors, but also by policy choices. Evidence indicated by the most recent Kenya National Bureau of Statistics (KNBS) 2024 Economic Survey, which reported that cement manufacturing activities were affected by manufacturers importing less clinker, partly by increased import levies that were supposed to encourage local production but created constraints to supply.

Credit Access and Financial Constraints

Besides material expenses, the construction industry had major problems accessing credit. Higher interest rates and stiffer lending rules meant that the process for developers and the purchase of homes was very difficult. This generated a domino effect in which there were fewer buyers, hence developers were more pessimistic and reluctant to launch new development projects, thus diminishing the demand for building services.

The residential sector, which has always been improving construction activity, was especially hurt. The number of prospective homebuyers was significantly reduced as mortgage rates went up and incomes lagged behind in the face of inflation. The 2024 situation, however, left many middle-income households that might have been interested in buying homes in 2022 or 2023 unable to afford them.

The 2025 Recovery—Signs of Revival

Government Investment as a Catalyst

Although 2024 is a celebration, there are things to be excited about as the construction industry has now started to move in the right direction. The government has remained steadfast in its pledge to develop infrastructure, and the FY2024-25 Budget provides KES193.4 billion ($1.3 billion) on infrastructure development and KES92.1 billion ($599.7 million) on the construction and redevelopment of housing.

This is a major vote of confidence in the significance that the sector plays in the economic growth of Kenya. The infrastructure allocation is sufficient alone to allow significant projects to be undertaken in transport, energy, and telecommunications. That said, the problem of housing allocation directly goes to the core of the lack of affordable housing places in Kenya.

The preliminary numbers of 2025 confirm such a positive forecast. Knight Frank has estimated an increase of 13.9% and 20.3% within cement production and consumption, respectively, in Q1 2025, compared to the same period in 2024. These are impressive development data that point to the fact that the industry, in fact, has started to grow out of its downturn in 2024.

Diversification and New Opportunities

The fact is that the recovery expected in 2025 will be powered not only by conventional residential and commercial construction. The Kenya Construction projects in 2025 are as follows: 30 million euros ($32 million) to be spent on building eight sports facilities in Kenya. The 104km four-lane roadway will have its starting point at Kisian in Kisumu and finishing at Busia border town.

There is growing sophistication and a variety of infrastructure projects. The sports facilities reflect the relative interest that Kenya is developing in sports, both as an economic opportunity and a social priority. On the same note, the government’s commitment to providing better connections and transportation charges was enhanced through the major road construction projects.

The energy industry is coming up as another giant figure in construction activity. Investments in renewable energy, transport, and housing sectors will also allow growth in 2025. Kenya has very ambitious renewable energy targets that will need a high level of construction activity, such as wind farms, solar installations, and the transmission system to serve them.

Market Dynamics and Structural Changes

The Shift Toward Sustainability and Technology

It is not only that the construction industry in Kenya is gathering momentum, but it is also changing. As the world strives to reverse climate change, many constructors have now resorted to using sustainable construction resources. Sustainable construction. This is one of the most expected construction trends in 2024, as building regulations are aimed at pushing builders to reduce their environmental impact.

Such a move toward sustainable construction will be an opportunity and a challenge. In one way, sustainable building methods and materials may be more expensive to install initially. They, on the other hand, have long-term advantages in terms of energy efficiency, lower operation cost, and compliance with strictly enforceable environmental rules.

Another noticeable trend is the incorporation of technology into construction procedures. Technology is shifting to Building Information Modeling (BIM) and flying drones to survey, and automated heavy machinery is making construction more efficient and saving a lot of money. This is especially necessary in such a market in which margins are usually narrow and competition is rampant.

Regional Variations and Market Segmentation

The recent difficulties have not impacted all areas and markets equally. The urban centers, such as Nairobi and Mombasa, have been more resilient than the rural locations mainly because of the ease of access to financing, coupled with demand density in cities. Likewise, the residential construction activity has not been doing as well as the commercial and industrial markets.

The industrial construction industry, in particular, has proven to be relatively resilient. We expect the industrial construction sector to be on an upward trend between 2025 and 2028, as the manufacturing and exports are also on the increase. This rise can be attributed to Kenya’s role as the region’s manufacturing hub and the fact that special economic zones are still being developed in Kenya.

Looking Forward—Optimistic Projections

Multiple Growth Scenarios

The prospects of the Kenyan construction industry are different according to which research body you use, but the overall predictions are optimistic. One major study’s findings indicate the construction market in Kenya is forecast to expand at a steady pace of 7.5% every year to grow to KES 1.02 trillion by 2025.

Some projections are less ambitious, however. After a projected decline of 1.3% in 2024, the Kenyan construction sector is expected to grow by 2.9% in real terms in 2025, with investments in transport, renewable energy, and the housing sector. The shifts in these projections indicate present uncertainty that exists in the market, but even the lowest indicates that there is going to be an upsurge in the growth, even then.

What is cheerful is that these projections refer to concrete factors and not mere optimism. The government revenues, construction works, and the increasing cement manufacturing numbers act as concrete supports to the growth prospects.

Long-term Structural Drivers

In addition to the rapid recovery, there exist some structural aspects that indicate long-term growth in the construction industry in Kenya. The rising population, urbanization, and the size of the middle class in the country maintain a positive outlook on the construction service.

Kenya, being a regional hub, also provides an opportunity in the construction of infrastructure. Initiatives such as the Standard Gauge Railway and port expansions have made the country a gateway to East and Central Africa, requiring investment in the transportation and logistics infrastructure on an ongoing basis.

The housing deficit issue is not something that we can ignore or we can dismiss, but it is, at the same time, a great opportunity. Some companies may want to produce estimates of the housing units needed in Kenya, which could tell them that they could be constructing homes in the country by the hundreds of thousands every year.

Challenges and Risk Factors

External Economic Pressures

However, a number of pitfalls may come up to nullify the strengthening. Global economic fluctuations, volatile commodity prices, and the volatility of the exchange rate threaten the construction sector. Kenya is also still vulnerable to external shocks, and any major global economic recession can affect construction activity in a short period of time.

The price of the imported materials is always a problem. Although the amount of cement and other resources produced locally has risen, many supplies in Kenya remain import-dependent in the construction sector. Supply chain disruptions to global supply or a devalued currency could lead to increases in construction costs at a very fast rate.

Another thing that remains very critical is the interest rates and the monetary policy. High interest rates may hamper access to credit and limit developer and consumer demand for construction services in the event that inflationary pressure compels the Central Bank to stick to high interest rates.

Regulatory and Policy Uncertainties

The construction industry is very well regulated, and the dynamics of the industry can be affected by policy alterations in the short run and in drastic ways. Recent experience with clinker import levies shows that even a policy that makes sense may be perversely affecting.

Environmental regulations have become stricter, and although this has had a beneficial effect in ensuring long-term sustainability, it can cost a lot in terms of meeting compliance and can create some short-term adjustment costs. A firm that does not respond to emerging environmental requirements can be at a disadvantage in the competition or fail to obtain licenses to set up new projects.

There is still also uncertainty in the planning and approval processes. Although the government has been trying to simplify these procedures, there are still instances where bureaucracy causes much delay on the projects, and their expenses are increased. The sharp drop in the approved building plans in 2024 indicates that these processes might have become difficult, or the market situation did not favor the developers in submitting plans.

Sectoral Performance and Opportunities

Infrastructure Leading the Recovery

The infrastructure sector seems to be spearheading the recovery of the construction sector. This is understandable since the government has remained committed towards infrastructure development, and the fact that infrastructure is of the essence to support economic progress in all sectors of the economy.

Transport infrastructure, especially, is witnessing a lot of investments. In addition to the large road schemes described above, there are currently investments in rail, expansion of airports, and development of ports. All these aspects involve a lot of construction, and this provides a venture to both local and foreign contractors.

A further area of growth is energy infrastructure. Kenya has made political commitments to the expansion of renewable energy capacity by continuing to build wind farms, solar power plants, and the related transmission facilities. The development of geothermal resources in the country is also undergoing, thus needing special skills in construction.

Residential Market Dynamics

The housing construction industry is facing difficulties and challenges. However, on the one hand, it is obvious that the demand has been affected by affordability constraints because of the decline in building plan approvals. On the contrary, there remains the underlying housing shortage, which implies that demand will eventually recover when economic conditions have properly started to improve.

The affordable housing scheme by the government is still one of the potential stimulators of residential construction. Although the process of increasing housing supply according to middle and lower-income families has been associated with a number of challenges, it is a concept that seeks to solve a real market need.

More and more people are becoming interested in new housing technologies, including mass production, as well as the introduction of mixed-use developments, which are a combination of dwellings, shops, hotels, and recreational centers. These developments would assist with overcoming the cost and performance dilemma in the housing sector.

Technology and Innovation Transforming the Sector

Digital Transformation in Construction

The Kenyan construction industry is experiencing a modernisation process into a digital industry that is completely revamping the way project developments are planned, executed, and managed. Increasingly larger projects are being done using Building Information Modeling (BIM) so that other trades can readily coordinate, and the cost estimate can become more accurate.

There is also an increasing role of mobile technology being played. Construction management apps enable real-time communication between job sites and offices, which streamlines coordination and eliminates delays. Digital issues are making subcontractor payments and material purchases easier to manage.

The use of drones is enabling the site survey, monitoring of progress, and safety checks. The technology can vastly cut down the time and cost of doing conventional surveying systems and gives more extensive and precise data.

Sustainable Construction Practices

The concept of sustainability can no longer be referred to as a buzzword in the Kenyan construction sector; it is evolving into a business requirement. Green building certifications are furthermore growing, and customers are pressuring more and more with demands concerning the environmentally friendly process of construction.

This movement toward sustainability is opening up new business models to companies that are in a position to supply green construction materials, energy-efficient designs, environmentally-friendly construction, construction techniques, and strategies. It is also innovating on ways to manage our waste, on how to conserve water, and even on how to integrate renewable sources of energy.

The potential issue with the industry is the balancing of aims on sustainability and costs. In most cases, sustainable construction may save money in the long run but increase the expenses at the front end and this is not good in a price-sensitive market.

Regional and International Influences

East African Integration and Cross-Border Projects

The construction sector in Kenya is being affected by the regional integration initiatives of the East African Community. Interstate construction projects, such as roads and energy transmission lines, are opening up the Kenyan construction firms to neighbouring markets.

Such projects as the Northern Corridor transport improvement project involve many countries, and they must be coordinated between national construction sectors. The regional projects are usually international in nature in terms of financing as well as knowledge, and the availability of such projects subjects the local companies to international standards, best practices, and technologies.

The private sector is also getting opportunities through regional integration. As the barriers to trade are coming down and further economic integration is taking place, the commercial and industrial buildings that facilitate transnational company operations are in demand.

International Investment and Expertise

Foreign investment has been playing a major role in the construction industry of Kenya. In particular, Chinese companies have participated in a few mega-projects in infrastructural developments, where both the finance and technical expertise are brought in. But a lot is now put on technology transfer and local capacity building as well.

Serbian and Albanian firms also have a presence in the market, especially in such sectors as renewable energy and building trade. These alliances have the potential to entail knowledge transfer, which enables local capacity building and new technologies and construction practices to be introduced.

The question faced by the industry is whether international partnerships actually lead to the building of local capacity or act as a source of temporary jobs. The most successful projects are normally those that feature both international experience and significant local involvement and skills training.