Determinants of Urban Housing Development by Private Investors in Nairobi County

Abstract

Investment is one of the key factors for economic growth in developing countries. The Government of Kenya recognizes housing as basic need thus an emphasis on the provision of adequate shelter for all the both in urban and rural areas. There are several factors that have led to this deficit among them: insufficient urban government policies, inefficient institutional policies as well as high social economic disparities among others. The purpose of the study was to examine relationship between selected factors by private investment in urban housing development in Nairobi County. The study specifically examined how income, interest rates, inflation rates and tax rates affect private investment in urban housing development. The study adopted descriptive research design. The target population was 153 registered real estate agents. The study adopted Kelley & Maxwell (2003) in sampling which resulted into a sample size of 15 real estate agents. The study collected secondary data over a period of 5 years (2012-2016). The data was collected a quarterly basis. The collected data was analyzed using SPSS. Both descriptive and inferential statistics were used in analysis. The analyzed findings were presented using Tables and graphs. The study established that inflation moved on a decreasing trend from 2012 to 2016, rental income tax rate was stable over a period 2016, interest rate moved in a fluctuating manner i.e. there was no stability, income of investors was stable across the studied period and there was stability in growth of private investors in Kenya over the studied period. Correlation analysis indicated that the relationship between income (r=0.858, p=0.000) and tax rate (r=0.560, p=0.010) was significant as their p values are less than 0.05. Regression results further indicated that p values for income (p=0.000) and tax rates (0.014) were less than 0.05 while their t values were 6.318 and 2.791 respectively which is greater than 1.96. This shows that income and tax rates are significant selected factors affecting private investment in urban housing development. The study concluded that the relationship between income and private investment in urban housing development ranged was positive based on the inferential statistics. The relationship between tax rate and private investment in urban housing development varied from positive to negative. The study recommends that the Kenya Revenue Authority should exercise extreme caution while formulating laws and regulations guiding taxation in Kenya. The national government should implement expansionary fiscal policies through increased government expenditures on infrastructures and other projects which shall increase the income of investors and therefore increased investment in urban housing development. Benchmarking and exchange programmes should be put in place across economies to compare effectiveness of tax rates on rental incomes.