Why Construction Cost Has Dropped in 2025, Ruto Promises 21,000 Jobs in New Deals

Hello Moneymakers, Kubasu here. In this Newsletter, we explain why it is cheaper to construct a house in 2025 compared to 2024’s last quarter, understand President Ruto’s multi-billion China deals and the 21,000 jobs attached to them, and CBK’s plan to lower lending rates.

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Construction Getting Cheaper

If you are planning to build a home, the first quarter of 2025 was a uniquely favourable time to lay the foundation, according to the Kenya National Bureau of Statistics' Construction Input Price Indices. With inflation in input costs nearly stagnant and some key materials seeing price cuts, the economic environment briefly tilted in favour of new homeowners.

Why This Matters: The home ownership rate in Kenya has continued to deteriorate, with only 8.5 million of the 13.9 million households owning the homes they live in. An earlier KNBS report showed that this figure represents 61 percent of the population, a drop from 64 percent in 2013.

The recent KNBS report, released a week ago, indicated that the Building Cost Index decreased slightly from 118.77 in Q4 2024 to 118.60 in Q1 2025.

"This was largely due to the decrease in the indices of BRC Mesh & Steel Reinforcement Bars (-2.08%), water waste systems (-1.24%), and glass & glass putty (-0.69%)," the report noted.

"Further, the fuel and transport index decreased by 0.39 percent to 129.24 during the quarter."

The report also showed that year-over-year inflation in construction inputs dropped from 3.56 percent in Q1 2024 to 0.18 percent in Q1 2025.

Flipside: However, the indices for quarry products, sand, and cement increased by 1.15, 0.61, and 0.92 percent to 107.44, 104.89, and 117.38, respectively.

Catch Up Quick: A separate KNBS report titled Leading Economic Indicators, released in March, showed that the total value of building plans approved by Nairobi City County increased from Ksh10.2 billion in January this year to Ksh15.8 billion in February. Residential buildings led the pack with a Ksh5.3 billion spike, while non-residential buildings saw a Ksh400 million surge.

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Ruto Hits China Ground Running

Barely 24 hours after President William Ruto set foot on Chinese soil, his administration inked seven separate deals totalling Ksh100.1 billion ($773 million). Notably, the agreements are expected to create a five-digit number of job vacancies in Kenya.

Why It Matters: With about two years remaining until the next election cycle, Ruto's administration is racing against time to fulfill its promise of creating 1 million jobs per year. The Head of State pledged to generate 4 million jobs during his first term in office.

The seven deals are expected to create 21,000 direct jobs and many more indirectly, across sectors such as tourism, manufacturing, and agriculture, among others. (To read more, visit Money254 coverage here)

The partnerships include:

• Kenya’s partnership with Zonken Group, worth Ksh51.8 billion ($400 million), for large-scale aloe cultivation, processing, and an export base in Baringo. The deal is expected to create 500 jobs.
  
  
• Kenya’s partnership with China Wu Yi Company, worth Ksh19.4 billion ($150 million), for investment in a Special Economic Zone for manufacturing, processing, and warehousing in Kikambala, Kilifi County. The project is expected to generate 5,000 jobs.
  
  
• A deal with Rongtai Steel Company, worth Ksh12.9 billion ($100 million), to expand the steel manufacturing plant in Lukenya. It could create 3,000 jobs.
  
  
• A Ksh6.4 billion ($50 million) deal was also reached for the development of the Kenya Smart Transportation Industry Park in Mombasa. It is expected to generate 5,000 jobs.
  
  
• A Ksh3.8 billion ($30 million) project for a hen-laying farm in Kenya is also expected to create at least 500 jobs.
  
  
• A Ksh2.9 billion ($23 million) partnership with Hunan Conference Exhibition Group for hotel acquisitions and leases in Nairobi to boost tourism.
  
  
• The government also inked a Ksh2.5 billion ($20 million) deal for a godowns project to set up manufacturing factories for textiles, garments, and solar power in Murang’a and Athi River. It could generate 7,000 jobs.

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CBK Addresses High Lending Rates

The Central Bank of Kenya (CBK) on Wednesday invited the public to submit comments on its plan to remove the Risk-Based Credit Pricing Model (RBCPM). A report by Capital Business indicated that the removal of the RBCPM is expected to address the persistent issue of high lending rates affecting the sector.

CBK further observed that the model, introduced in 2019, fell short in its effectiveness in supporting banking sector reforms.

Instead, the financial regulator has proposed the use of the Central Bank Rate (CBR) as the common reference rate for pricing loans. This means that lending rates will be calculated by adding a premium, referred to as “K,” to the CBR, which reflects banks’ cost of funds.

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KRA Goes After Small-Scale Traders

The Kenya Revenue Authority (KRA) is pushing to scrap a law that exempts small businesses with annual sales under Ksh5 million from using the electronic Tax Invoice Management System (eTIMS), Business Daily reports. The exemption, which was introduced in December 2023, slowed efforts to bring informal traders into the tax net.

Previously, all businesses were required to issue electronic invoices, which helped KRA track transactions and curb tax evasion. Since the change, larger companies now issue invoices for exempted small suppliers, prompting many to avoid working with them.

KRA says only 41% of targeted small traders have adopted eTIMS, with many lacking the tools or knowledge to comply. The authority aims to raise compliance and grow its tax base, targeting Sh4.59 trillion in revenue by 2028.