The Relationship Between Interest Rates and Real Estates Development Cost in Mombasa County

Abstract

The study was geared towards finding the relationship between interest rates and real estates’ development cost in Mombasa County. It was guided by two specific research objectives; to determine the relationship between interest rates and real estate development cost in Mombasa County and to establish the other factors that influence the real estate development cost. The study adopted a census survey research design. The population consisted of 10 real estate developers picked using thebiased sampling technique. Data was both primaryand secondary, primary data was collected using questionnaires which contained both open-end and close-end questions while Secondary data was collected from government sources. Collected data was coded and analyzed using SPSS, through regression analysis. Tables, percentages and frequencies were used to present the findings. The results inferred the existence of a weak positive relationship between interest rates and real estate development costs in Mombasa County. Other factors were also found to affect the real estate development costs these are Insecurity, Valuation Fundamentals, Discount Rate, Capital Flows, Land Prices, Property Income Tax and Inflation. The study concludes that investors factor in the interest rates when pricing the real estate units therefore buyers need to be aware of the interest rates and real estate dynamics. In addition the study concludes that there is need for the county government of Mombasa to work with the national government to address the insecurity issue and need for regulation in pricing of land and property valuation. The study further recommends that the incorporation of cheaper building technologies could help lower the cost of developing real estate units which can be achieved through trade symposia and the County Government creating an investor friendly climate to woo more investors into the county and thereby the real estate industry.