Peter Kibugi, founder and managing director of Crystal Pearl Real Estate
The challenge is deployment.
Getting money off the balance sheet and into the ground in a way that protects investors, controls costs, and preserves affordability is where many housing projects encounter their most significant difficulties. A well-structured financing package can still fail if capital is deployed inefficiently, construction costs spiral out of control, or project timelines slip beyond expectations.
For affordable housing developers, successful deployment is not simply about building homes. It is about ensuring that every shilling raised is translated into maximum value without pricing intended beneficiaries out of the market.
Construction finance is never a lump sum.
One of the most common misconceptions about development finance is that funds are released upfront once a project receives approval. In reality, construction financing is highly structured. Lenders rarely disburse the full loan amount at the beginning of a project. Instead, funds are released in stages through a process known as drawdowns, with each release tied to verified construction milestones. A typical draw schedule may allocate an initial portion of financing to land acquisition and site preparation. Additional tranches are then released as foundations are completed, structures rise above ground, roofing is installed, and interior works progress toward completion. This approach protects lenders by limiting their exposure at any given stage of construction.
If problems emerge, funding can be paused before additional capital is committed. For developers, however, milestone-based financing creates its own set of challenges. Construction expenses often arise before reimbursement is received from lenders, meaning developers must maintain sufficient working capital to bridge the gap between expenditure and drawdown. Delays in inspections, approvals, or certification can place significant pressure on project cash flows even when financing has already been secured.
Managing timing and currency risks
Affordable housing projects in East Africa face an additional complication: volatility. Many construction materials, equipment, and specialised services are priced in foreign currencies, while rental income and home sales are generated in local currency.
A weakening local currency can therefore increase project costs significantly between the time budgets are prepared and materials are procured.
Timing risks compound the challenge
Construction delays caused by weather, supply chain disruptions, labour shortages, or regulatory approvals can increase financing costs and extend project timelines. Every month added to a construction schedule carries financial consequences, particularly where debt financing is involved. To reduce these risks, developers increasingly rely on pre-sales programmes and tenant purchase schemes that generate early cash inflows before construction is completed. These arrangements not only provide additional liquidity but also demonstrate demand for the project, strengthening confidence among lenders and investors.
The cost compression challenge
Few sectors are as sensitive to cost escalation as affordable housing. Market-rate developments can often offset rising costs by increasing sales prices or rents. Affordable housing projects have far less flexibility. Their financial viability depends on maintaining prices within reach of targeted households. When construction costs rise unexpectedly, developers face difficult choices.
They can absorb the additional costs and accept lower returns. They can seek additional financing, which often increases borrowing costs. Or they can increase selling prices and rents, potentially pushing units beyond affordability thresholds. None of these options is ideal. This reality makes cost control a structural requirement rather than a simple management objective.
Developers who fail to manage costs effectively risk undermining the very purpose of affordable housing. Cost overruns can quickly consume contingency reserves and create financing gaps that are difficult to fill. Once those reserves are exhausted, projects often face pressure to reduce quality, delay completion, or seek additional capital under less favourable terms.
Building more efficiently
To address these challenges, affordable housing developers are increasingly adopting construction approaches designed to improve efficiency and reduce costs. Prefabricated building systems have gained attention because they shorten construction timelines and reduce material waste. Standardised unit designs allow developers to benefit from economies of scale while simplifying procurement and construction processes.
Bulk purchasing arrangements help secure better pricing on materials, particularly for large projects involving hundreds or thousands of units. Phased development has also emerged as a practical strategy. Rather than constructing an entire project simultaneously, developers build in stages, allowing revenues from completed phases to support subsequent construction. These approaches may not eliminate cost pressures entirely, but they help developers maintain tighter control over project economics and improve their ability to deliver affordable units at scale.
Capital calls and housing investment funds
Not all affordable housing developments are financed on a project-by-project basis. Increasingly, developers and investment managers are turning to dedicated housing funds that pool capital from multiple investors and deploy it across a portfolio of projects.
Many of these vehicles operate as closed-end funds
Under this structure, investors commit capital during a defined fundraising period but do not necessarily transfer the entire amount immediately. Instead, capital is drawn down through a series of capital calls as investment opportunities arise. This approach provides several advantages. First, it aligns investor contributions with actual project requirements, reducing the inefficiency associated with holding large amounts of idle capital.
Second, it allows fund managers to deploy resources strategically over several years, selecting projects based on market conditions and development readiness rather than rushing to invest available funds. Third, it improves overall returns by ensuring capital is working productively throughout the investment cycle. For affordable housing, where projects often require lengthy development periods and careful coordination among multiple stakeholders, this flexibility can be particularly valuable.
Balancing speed and discipline
One of the greatest temptations in affordable housing development is the desire to move quickly. The need is undeniable. Housing shortages continue to grow, urban populations are expanding rapidly, and political pressure to deliver visible results remains intense. Yet speed without discipline can be costly. Projects that rush procurement processes, underestimate construction costs, or neglect contingency planning often encounter setbacks that ultimately delay delivery and increase expenses.
Successful developers recognise that deployment is not merely about spending money. It is about allocating capital in ways that preserve affordability while protecting project viability. Every procurement decision, construction milestone, and financing drawdown has implications for the project's long-term success.
The most effective affordable housing developers are therefore not necessarily those who raise the most capital. They are those who deploy it with the greatest precision. But even successful deployment is only part of the story. Once construction is complete and families move into their homes, developers face another challenge: managing capital over the life of the asset while balancing financial returns with social impact.
The writer is the founder and managing director of Crystal Pearl Real Estate
