Punitive corporate taxes, inadequate mortgage options and not enough incentives for developers are just a few reasons why affordable housing has remained an elusive ideal in Africa, but signs of stagnation in the high-end housing market could be changing that.

Tax incentives for developers who build at least 400 affordable residential units could make Kenya’s lower-income housing segment the next big investment frontier in the real estate sector, Business Daily reported.

Kenya’s Finance Act 2016 lowers the corporate tax rate from 30 percent to 15 percent for qualifying developers.

Taxes have been a big expense for Kenyan developers, increasing their costs and discouraging them from developing low-cost housing, according to Cytonn Investments Management Ltd.

Less than 10 percent of African households can qualify for a mortgage for even the cheapest new house, but the low-income housing market has more potential in Africa than the high-income market where most new home construction is currently focused, according to a July report in How We Made It In Africa.

Low- and middle-income earners in Africa typically have to pay cash for homes.

A lack of mortgage solutions in many African countries is suppressing a “massive opportunity” in lower-to-middle income housing, said Peet Strauss, group development manager for real estate agency Pam Golding Properties in How We Made It In Africa.

South Africa-based Pam Golding Properties has 300-plus offices in sub-Saharan Africa through partnerships with local players in countries including Kenya, Mozambique and Zimbabwe. It focuses on the upper-end of the residential and commercial market.

Demand is still strong for expensive African housing developments that cater to expats and wealthy business people, but the largest housing potential is at lower-income levels, Strauss said.

Housing exhibition events held in 2016 indicate most industry stakeholders have been targeting the lower middle and low-income housing segments, according to Cytonn Investments.

This is attributed to poor performance of the high-end market and enhanced tax incentives.

“There is a stagnation in prices in some high-end property due to too much supply that had hit this segment of the market,” according to Cytonn. “The lower-income housing segment is thus the next investment frontier for the real estate sector as developers embrace it and the market gets enlightened on the available products in the market through increased advertisements and events like expos.”

However, interest rates for home loans are more than 20 percent in some African markets, with little competition in the banking sector, perceived credit risks and high transaction costs.

Less than 10 percent of African households can afford a mortgage for even the cheapest new house, according to the Centre for Affordable Housing Finance in Africa. For example, in Angola, where the lending rate is around 15 percent, just 2.2 percent of the urban population can afford a US$200,000 home. The average household income in the country’s urban areas is less than 10 percent of what is needed to qualify.

The good news?

“Banks are moving into Africa,” Strauss said. “Some South African banks are global already. And with that will come a slow, maturing, mortgage solution that is particular to every country. It will open it up. It takes a mindset with a bit of an education as well for people to understand that they can create wealth through property by using the bank’s money.”

In October, African Development Bank approved a $42 million loan to help finance affordable housing in South Africa, Public Finance International reported.

The goal is to improve access to long-term affordable housing finance for lower-income earners who have limited opportunities to access affordable mortgages. Also, the loan is expected to help consolidate the growth of a strong affordable housing sector in South Africa.

One of the continent’s most developed countries, South Africa has an acute shortage of affordable housing — an estimated 3 millions units short in 2014, according to Public Finance International. This has resulted in more than 2,600 informal settlements springing up around 70 major urban areas. This makes it difficult for the government to reduce inequality and achieve inclusive growth, AfDB said.

Karibu Homes is one of a handful of developers building affordable homes in Kenya. Affordable homes are seen as critical to slowing the spread of slums and improving the quality of life there, according to a Thompson Reuters Foundation report.

Although Kenya needs millions of quality, affordable homes, few are built due to high land prices, lack of access to financing and government bureaucracy, experts say:

It is a story echoed across Africa which has the fastest growing cities in the world, with 40 percent of the continent’s 1 billion people in towns and cities, according to UN-Habitat.

Most new homes in Kenya target the middle and upper classes as it’s easier to make a profit from high-end property sales.

“It’s a property market that’s oriented towards wealthy people,” said Britt Gwinner, head of housing finance for the World’s Bank’s International Finance Corporation (IFC). “That’s where the money is.”

Karibu Homes says its cheapest property, a one-bedroom apartment, costs 1.8 million Kenyan shillings ($17,660) — 17-times less than the average asking price of a house in Kenya at $306,000, according to real estate firm Hass Consult.

Despite its commitment to help ordinary Kenyans buy their first homes, Karibu Homes discourages mortgages, encouraging buyers to pay in cash installments and relying on sales to finance construction.

“We have to pay our contractors. If we can’t release those funds, we’ll basically go bankrupt,” said Ravi Kohli, managing director of Karibu Homes in Nairobi. “If things go well … an active mortgage market will trigger the housing ownership revolution.”