Nairobi’s construction sector slowed sharply by the end first half of 2025, with the value of building plans approved by the county government tumbling more than 50% from a year earlier, according to data from the Kenya National Bureau of Statistics (KNBS).
- •The approvals stood at KSh 13.7 billion in June 2025, down from KSh 29.3 billion in the same month of 2024.
- •After adjusting the figures for rising construction costs, the real value of the building approvals fell to KSh 11.5 billion, from KSh 25.1 billion a year ago.
- •According to KNBS data, construction costs ticked higher in the second quarter of 2025, with the overall index rising to 119.75 from 119.05 in the first quarter.
The June slump capped a volatile year for the sector. The approvals had spiked to KSh34.6 billion in March 2025, the highest in at least two years, driven by a surge in large commercial projects, only to collapse to a year-low of KSh7.5 billion in May. In 2024, approvals also peaked mid-year and in December, suggesting seasonality tied to financing and budget cycles.
While residential building plans continue to dominate the pipeline, accounting for about four-fifths of approvals, the half-year decline was most pronounced in the residential building segment.
Approvals shrank by 56% in real terms year-on-year, while non-residential approvals slid a milder 39%.
Rising construction costs are eroding the real value of projects. Across the 13-month period, real approvals were consistently 10% to 15% below nominal levels, underscoring the squeeze from higher prices of cement, steel and imported inputs.
The increase was fueled largely by pricier building materials, where the index climbed to 127.39 from 125.90, led by gains in concrete and asphalt (+2.9%), cement (+2.6%) and steel (+1.5%).
Year-over-year inflation in the sector remained muted, at 0.18% in the first quarter and 0.59% in the second. For developers, however, that single-digit rise translates into millions in additional costs across large projects. Given that the upticks in costs were prevalent in the most pertinent construction materials, this could be a bottleneck in budgeting new works.
Offsetting the rise was cheaper fuel, which dragged the transport, fuels and lubricants index down 0.6% after pump prices fell 1.6% during the period. Labor and equipment costs also showed little movement in the second quarter, underscoring a period of stability for contractors.
The labor index saw only fractional gains, with machine and plant operators edging up 0.07% and carpenters, painters, welders, and mechanics rising from 112.00 to 112.17, and masons and foremen inching higher to 110.65 from 110.63.
Unless material costs ease in the second half of the year, Kenya’s construction sector risks a further slowdown.
