Construction Costs in Kenya Rose 5.52% in a Year: What It Means for Developers, Home Builders and Buyers

Kenya's property market is being shaped by more than the price of completed homes and land.

For developers and people planning to build, another number deserves attention: the cost of construction itself.

Data from the Kenya National Bureau of Statistics (KNBS) shows that the country's Construction Input Price Index increased by 5.52% year-on-year in the second quarter of 2026. The index also increased by 5.73% between the first and second quarters of 2026. (KNBS Repository)

The increase matters because construction costs ultimately influence development budgets, selling prices, rental projects and the amount of capital required to complete a building.

But the headline figure does not mean that every building material became 5.52% more expensive. The Construction Input Price Index measures a basket of construction inputs, including materials, labour, equipment and transport. (KNBS Repository)

What pushed construction costs higher?

According to KNBS, the second-quarter increase was primarily driven by transport, fuel and construction materials. (KNBS Repository)

The transport, fuels and lubricants category recorded the largest increase during the quarter.

KNBS reported that this category increased by 21.47% between Q1 and Q2 2026.

Within that category:

• Fuel and lubricants increased by 31.16%

• Transport costs increased by 12.34%

These increases are significant because construction is dependent on moving materials from suppliers to construction sites.

Cement, steel, ballast, sand, machinery, timber and other materials may all involve transportation at one or more stages of the construction process.

That means an increase in transport costs can affect the overall cost of a project even when the underlying building material itself has not experienced an equivalent price increase. (KNBS Repository)

The numbers behind the increase

Source: Kenya National Bureau of Statistics. (KNBS Repository)

What does this mean for someone building a house?

For an individual building a home, the effect will depend heavily on the project's location, design, materials, contractor and construction period.

A person building a modest home is not necessarily going to experience exactly a 5.52% increase in their final project cost.

Why?

Because the KNBS index is an economy-wide measure of construction inputs, rather than a quotation for a specific house.

A three-bedroom bungalow, a 20-unit apartment block and a commercial building use very different combinations of materials, labour and equipment.

The practical lesson is therefore not:

"Your house will cost 5.52% more."

Instead, the data suggests that developers should be careful when preparing construction budgets because input costs are changing.

Developers may need larger contingency budgets

Construction projects rarely proceed exactly according to the original budget.

A project can encounter:

• material price changes;

• transportation cost increases;

• delays;

• changes in design;

• additional labour requirements;

• unexpected site conditions;

• financing costs;

• approval-related expenses;

• changes in project specifications.

When construction inputs are already rising, a developer who prepares a budget using old quotations may find that the actual cost is different when procurement begins.

This makes current supplier quotations and regular budget reviews particularly important.

What does this mean for property prices?

This is where the issue becomes more complicated.

Higher construction costs can put upward pressure on the cost of developing new property, but that does not automatically mean property prices will rise by the same percentage.

The final selling price of a property is influenced by many factors, including:

• land acquisition cost;

• construction cost;

• financing;

• location;

• demand;

• infrastructure;

• developer margins;

• taxes and statutory charges;

• market competition;

• expected rental income.

For example, a developer may face higher construction costs but be unable to increase the selling price by the same amount if buyers in the area cannot afford it.

The developer could instead absorb part of the increase through a smaller margin, redesign the project, delay construction or change the specification.

Therefore, construction inflation should be treated as one factor in property pricing rather than a direct prediction of future property prices.

The rental market can also feel the pressure

Construction costs matter to rental property investors because the cost of developing a rental building affects the amount of capital required before the first tenant moves in.

Consider an investor developing apartments.

The investor needs to account for:

Land + construction + financing + approvals + infrastructure + marketing + operating costs.

If construction costs rise while expected rents remain relatively stable, the investor's projected return can change.

This is one reason property investors should not look at rental income alone.

A KSh10 million development that generates KSh1 million a year in gross rental income does not automatically produce a 10% return after expenses.

The initial development cost, financing, vacancies, maintenance, management, taxes and other expenses all matter.

Existing property versus new construction

There is also an important distinction between existing property and new development.

An existing house does not suddenly become 5.52% more expensive to maintain simply because the Construction Input Price Index increased by 5.52%.

However, maintenance and renovation costs can be affected by changes in construction inputs.

For example:

• replacing a roof;

• renovating bathrooms;

• repainting;

• repairing walls;

• replacing plumbing;

• installing new fittings;

• constructing extensions.

The actual cost will depend on the materials and services involved.

Kenya is still building

Despite the pressure on construction inputs, construction activity remains an important part of Kenya's economy.

The 2026 Economic Survey reported that construction activity rebounded in 2025, growing by 6.8%, after contracting by 0.7% in 2024. (Kenya National Bureau of Statistics)

This provides important context.

Rising construction costs do not mean that development has stopped.

Instead, Kenya's property and construction markets are operating in an environment where development activity and input-cost pressures are occurring at the same time.

That creates different challenges for developers, contractors, homeowners and investors.

What should property buyers watch?

A buyer purchasing a completed property does not necessarily need to track every construction-input index.

But construction costs can still be useful when evaluating new developments.

Before committing to an off-plan or newly constructed property, buyers can investigate:

1. How long has construction been underway?

Long delays can expose projects to changing construction and financing costs.

2. What is included in the quoted price?

Ask whether the price includes:

• parking;

• water connection;

• electricity connection;

• service charges;

• landscaping;

• security;

• common-area facilities;

• legal and other transaction costs.

3. Who is developing the project?

Look at the developer's previous projects and delivery history rather than relying solely on promotional material.

4. What is happening around the development?

Infrastructure, accessibility, utilities and surrounding development can have a major effect on a property's usefulness and marketability.

5. What documents should be verified?

Property buyers should independently verify ownership, approvals and other relevant documentation before committing funds.

What should developers watch?

For developers, the latest KNBS data provides another reason to maintain detailed project budgets.

A practical development budget should distinguish between:

Land cost

Professional fees

Approvals

Construction

Transport

Financing

Marketing

Contingency

Other statutory and project costs

The more accurately these costs are tracked, the easier it becomes to understand whether a project is still financially viable as conditions change.

The Property Journal Analysis

The latest construction data provides a useful warning for anyone planning a property project in Kenya.

Construction is not a fixed-cost business.

KNBS recorded a 5.52% year-on-year increase in construction input prices in Q2 2026, with a particularly large quarterly increase in transport, fuel and lubricants. (KNBS Repository)

But the data should not be interpreted as a prediction that houses will become 5.52% more expensive.

The property market is more complicated than that.

For developers, the important question is whether the cost of developing a particular project is rising faster or slower than the revenue that project can realistically generate.

For buyers, the important question is whether the final property price makes sense relative to the location, quality, infrastructure, financing requirements and alternatives available in the market.

And for people planning to build their own homes, the lesson is simple: obtain current quotations and avoid treating an old construction budget as a guaranteed final cost.

SOURCE NOTE

This article uses the Kenya National Bureau of Statistics Construction Input Price Indices for Q2 2026 as its principal source. The index measures changes in construction inputs including materials, labour, equipment and transport. The interpretation of what these changes mean for individual projects is The Property Journal's analysis and should not be confused with an official KNBS forecast. (KNBS Repository)

Primary source

Kenya National Bureau of Statistics — Construction Input Price Indices Q2 2026

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