Kenya has been in the Global limelight as a favorable investment destination, especially after the GES summit that happened in Nairobi in July 2015. International media has picked this up as expected. A great take I liked was by Forbes , a nice article entitled Why invest in Africa’s Fastest growing economy.
It is an open secret that the business environment in Kenya has been great, with many multinational companies setting up office in the recent history ; big names like Google, IBM, Microsoft, ORACLE, SAP, Coca Cola, GE just to mention a few.
I know you have seen the “for sale” sign on those apartments on your way to work, a number billboards about property open days as you sat in the notorious Nairobi traffic jam, or you just saw a whole newspaper page advert on a new real estate development in Nairobi. All these signs suggest something, the real estate sector is flourishing. It has experienced it’s share of good performance over the years, contributing to 7.85% and 8.12% of the GDP for the last two years respectively according to the Central Bank of Kenya economic review.
This growth in real estate in Kenya is mainly driven by a huge housing deficit being experienced in housing in Kenya. Currently, the Kenya urban population is growing at an average rate of 4.2% annually resulting in a demand of about 150,000 new housing units every year. The market is only supplying about 20,000 units per year, leaving a yawning deficit. In Nairobi alone, the housing deficit stands at 80,000 units annually according to the Planning and Housing Executive Committee.
This factors present a superb opportunity for those wishing to invest in property in Kenya. With rental returns having grown by 9.7% over the past year and property prices having increased 3.46 times over the last 15 years, the prospect of making a neat return on investment real estate in Kenya is almost given.
However, there are several things to consider before investing in real estate in Kenya.
What You Must Know Before You Invest In Kenyan Real Estate
There are several important things you need to understand and check before you get into a property transaction in Kenya. Like any legitimate business, there exists the very real possibility of getting swindled.
To avoid complications, it is first important to check the validity of the title deed, the zoning of the property and whether the land rates and taxes have been paid up to date. It also necessary to check if there are any caveats against the property or any pending disputes on ownership.
After all these check out, the process of purchase is pretty straightforward. But if you are new, it will save you a lot costly mistakes to enlist the services of a qualified legal counsel.
Then there is the issue of financing. If you choose to get a loan or a mortgage to finance your property investment venture in Kenya, be sure that you fully understand exactly how much you are going to pay back. Flexibility on the payment terms is a very good thing.
Finally is the consideration of security and insurance. Real estate investment, as any other asset, should ideally be insured. Shop around for the best insurer, and make sure you understand the terms, especially the fine print.
Property investment options in Kenya
Now that we know that investing in real estate in Kenya is a great idea, and we know what to look out for so as not to make mistakes. We can look at some ways one can invest in property in Kenya.
1. Buying land
The most popular real estate investment avenue in Kenya is Land. Investing in Land in Kenya is appealing simply because once you buy, you really don’t have to do much, most people buy and wait then resell later at a profit. As the real estate mantra goes, don’t wait to buy, buy and wait.
There are a several ways to add value to this sort of investment, such as fencing it, connecting power and water lines and building an access road. As with many real estate investments, location is always King.
Ofcourse the option of developing the land is available , and depending on what one chooses to build and the location of the property, different levels of revenue can be obtained.
2. Building residential property in Kenya
Residential property is another property investment avenue in Kenya. Actually if one has the finances, one can buy land, build residential units and choose to sell or let. This strategy offers higher returns but requires a lot of expertise and is capital intensive. There are ways of making this work better by using different building technologies, like prefab housing that we covered in a previous blog.
3. Commercial Real estate
Finally we have the option of investing in commercial real estate. Not known to many people, commercial real estate offers more reliable income than residential property investment in Kenya. This is because the lease agreements with the tenants is usually for periods not less than five years and with a rent increment clause that ensures the owner gets incremental income from the property over the lease period. This is also capital intensive and requires a degree of expertise.
Now that you know where to start, you can have a look at our extensive property listing and have us start you on your way to making it big by investing in property in Kenya. Alternatively you can contact us here.
Written by Nathaniel Ndegwa