Kenyan banks brace for real estate loan stress as CBK survey shows NPL expectations jump
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The share of Kenyan banks expecting non-performing real estate loans to rise over the next quarter nearly doubled to 27 per cent in June, according to the Central Bank of Kenya's latest credit survey.
The share of Kenyan banks expecting non-performing loans (NPLs) in the country's real estate sector to rise over the next quarter nearly doubled in the second quarter of 2026, to 27 per cent in June from 14 per cent in March, according to the Central Bank of Kenya's (CBK) latest credit survey, reported by The Kenyan Wallstreet on September 9, 2026.
The weaker outlook for real estate lending contrasts with building and construction, where 41 per cent of banks expect NPLs to decline, one of the highest decrease readings in the survey. Demand for credit in the sector also strengthened, with 42 per cent of respondents reporting increased demand in June, up from 29 per cent in March.
Trade and personal and household lending absorbed much of the banking system's appetite for new credit, with about 65 per cent of banks reporting increased demand from trade borrowers and 66 per cent from personal and household borrowers. Households generated the strongest demand for credit, but nearly 81 per cent of lenders said they would intensify recovery efforts in the sector in the third quarter, the highest proportion of any sector.
Banks were not responding with a broad tightening of standards, with credit standards remaining unchanged across all economic sectors in the second quarter. The expansion of lending was visible on bank balance sheets, as total assets increased 1.7 per cent to KSh8.88 trillion and loans rose to 52.3 per cent of total assets from 51 per cent.
The banking sector's capital adequacy ratio slipped to 20.0 per cent in June from 20.4 per cent in March, still well above the CBK's regulatory minimum of 14.5 per cent total capital to risk-weighted assets.