What the CBK Rate Cut Means for Kenya’s Real Estate Market in 2025

• On June 10, 2025, the Central Bank of Kenya (CBK) cut its benchmark lending rate by 25 basis points, reducing it from 10% to 9.75%.
• This rate cut comes at a time when high inflation, elevated loan costs, and reduced liquidity have put pressure on households and businesses alike.
• Investors, whether purchasing rental properties or engaged in real estate development, are always sensitive to interest rate changes.

On June 10, 2025, the Central Bank of Kenya (CBK) cut its benchmark lending rate by 25 basis points, reducing it from 10% to 9.75%. What this means is that it’s now cheaper for commercial banks to borrow money from the CBK, and in turn, they are expected to lower the interest rates they charge on loans to businesses and individuals. In simpler terms, when the benchmark rate goes down, borrowing becomes less expensive, making it potentially easier for Kenyans to access credit for things like buying homes, developing property, or investing in real estate projects. While the cut may appear modest, it sends a strong signal about the government’s intent to stimulate economic activity and ease the financial pressure many sectors, including real estate, have been facing.

In this article, we explore what the rate cut means for buyers, investors, and the broader real estate sector in Kenya.

Understanding the CBK Rate and Why It Was Cut

The CBK rate, also known as the Central Bank Rate (CBR), is the key interest rate used by the Central Bank to influence the cost of borrowing and the overall availability of money in the economy. By adjusting this rate, the CBK tries to control inflation, encourage or slow down lending, and support economic stability.

This rate cut comes at a time when high inflation, elevated loan costs, and reduced liquidity have put pressure on households and businesses alike. With economic recovery a priority, lowering the CBR is one way to try and stimulate growth by making credit more accessible.

Impact on Mortgage Rates and Homebuyers

A lower CBR can lead to lower mortgage interest rates, especially for loans with variable interest terms. While commercial banks are not required to automatically reduce their lending rates, the CBK’s move creates room for them to offer more competitive loan products.

For aspiring homeowners, this could mean:

• Lower monthly mortgage payments
• Improved chances of loan approval due to more favourable terms
• A renewed sense of possibility for those previously priced out of the housing market

However, the actual impact on mortgages depends on how individual banks respond and how quickly they adjust their rates. Some financial institutions may take a wait-and-see approach, especially in light of broader political and economic uncertainties.

Developers May Gain Breathing Room

For developers, especially those operating in the mid- and low-income housing segments, interest rates play a crucial role in project planning and execution. Many rely on loans to finance construction, purchase land, or expand into new markets.

A reduced cost of borrowing could allow developers to:

• Resume projects that had stalled due to high financing costs
• Reduce the final pricing of homes or units due to lower capital expenses
• Launch new developments, especially in high-demand satellite towns

This is particularly relevant at a time when developers are grappling with increased taxation under the Finance Act and rising costs of construction materials. Any relief in financing could offer a needed cushion.

Real Estate Investors: Reviewing the Opportunity

Investors, whether purchasing rental properties or engaged in real estate development, are always sensitive to interest rate changes. A lower rate environment generally improves the viability of debt-financed investments.

With the rate cut, investors could:

• Refinance existing loans to take advantage of better terms
• Explore new investment opportunities, especially in underpriced areas
• Consider land banking or phased developments with lower upfront financing risk

However, ongoing political unrest and fiscal policy shifts, like new property-related taxes, still present cautionary flags. Investors will need to balance these risks against the potential gains from improved lending conditions.

The Broader Economic Context: Why Timing Matters

The June rate cut comes at a time when many sectors of the Kenyan economy are navigating a challenging environment. High inflation, elevated loan costs, and reduced consumer purchasing power have slowed business activity and weakened demand across industries, including real estate. In response, the Central Bank’s move to lower lending rates is intended to stimulate economic growth by encouraging borrowing, investment, and capital flow.

For the property market, this shift offers a potential boost. Lower financing costs could help revive stalled developments, support homebuyers seeking affordable credit, and bring some stability to a market that has recently faced rising costs and subdued activity.

What to Watch in the Coming Months

Several factors will determine whether this rate cut meaningfully improves conditions for real estate buyers, sellers, and investors:

• Bank lending behaviour: Will banks pass on the benefits through lower mortgage and project financing rates?
• Mortgage uptake: Will more Kenyans apply for and qualify for home loans?
• Housing starts and sales: Will construction activity pick up in the second half of the year?
• Property prices: Will buyer demand increase, stabilising or pushing prices upward?

The Central Bank’s next monetary policy review will also be watched closely to see whether further cuts or a pause is on the table, especially if inflation remains elevated.

Conclusion

The CBK’s decision to lower the benchmark lending rate is a timely move aimed at stimulating economic growth. While the impact will take time to ripple through the system, it offers a cautious sense of optimism for the real estate market.

Buyers may find themselves with more favourable financing options, developers may revisit postponed projects, and investors could see opportunities to secure better credit terms. Still, the full effect will depend on the response of commercial banks, the evolving political climate, and the resilience of consumer confidence.

For now, stakeholders in Kenya’s real estate sector should stay informed, engage their financial institutions, and reassess their strategies, because even a small rate cut can signal big changes ahead.