Performance of Mortgage-Financed Construction Projects in Kenya:

Empirical Evidence from Developers

Abstract

Mortgage-financed construction projects (MFCPs) in Kenya are widely perceived to underperform, yet empirical evidence specific to mortgage-financed delivery remains scarce. This study evaluates MFCP performance across five indicators, cost, schedule, quality, safety, and cash flow, using a cross-sectional survey of 171 developers drawn from 1,063 mortgages initiated in FY 2021/2022. Results show 67.5% of projects exceed budgets (mean overrun 9.9%) and 65% are behind schedule (mean overrun 9.4%); 59.3% meet quality expectations with a mean rework cost of 6.1%; nearly 18% report serious safety incidents; and cash-flow constraints are moderate on average. These findings substantiate a persistent performance gap in mortgage-backed delivery relative to benchmarks in the wider construction sector. Practically, the study recommends performance-based lender monitoring, targeted products for the “missing middle” (KSh 21–100M), and developer investment in digital cost/schedule control and safety/quality training. Policy-wise, results inform the Affordable Housing Programme by linking financing models to delivery risks. Originality lies in isolating MFCPs as a distinct financing modality and quantifying their KPI profile to guide lenders, regulators, and developers.