Top factors to consider before investing in property in Kenya
Many people invest in real estate because the general trend of
property is that it increases in value. As such, your returns are guaranteed
over some time. It is important for you to understand these factors before you
invest in real estate.
1. Purpose
Before purchasing
either land or a building, the first factor is to determine why you are
making the purchase. For land, consider factors like: – Is it for immediate
settlement, immediate construction or for speculation purposes. Are you
purchasing for your use or you would like to resell? The same case
applies to purchase of a house. Will it be a house for you to live in or a
house that you may want to rent out?
2. Type
Once the purpose is determined, you then must
consider if you are making a commercial, residential, agricultural or an
industrial property. Commercial properties are generally used as outlets
for sale and purchase of goods or services or for use as offices. Commercial
properties are usually more expensive than residential property and attract
different taxes and this impacts on your budget. For houses, additionally
consider whether you need to purchase an apartment, townhouse, bungalow or a
house with a separate servant quarter.
3. Budget
The budget you have available determines the locations
you can afford including the size of either land or building. The budget should
be enough to not only cover the purchase price, but sufficient enough to cover
taxes, agents’ commissions and the legal costs of conveyancing.
4. Location
Location
is usually the biggest determinant of price. If you are purchasing hoping
for returns from increased sale price, then you would need to select property
in an area that is experiencing or is expected to have a high price
appreciation. If you are purchasing a house to live in, then you must consider
a location that is easy to commute, is secure, have social amenities and
factors like schools and availability of transport.
5. Property Tenure
In Kenya, there are two main forms of property
tenure. These are free hold and leasehold interest. Freehold property gives the
owner absolute ownership of the property and does not attract ground
rent. Leasehold property confers to the owner a limited period to own the
property which can be extended. As evidence of ownership, the government issues
buyers with a Certificate of Title for freehold and a Certificate of lease for
leasehold titles as a primary evidence of property ownership. Article 65 of the
Kenyan Constitution limits foreigners to holding only leasehold titles for a maximum
of 99 years but permits future renewals on condition that the subject property
held under that title is economically active and it is not required for public
use purposes. Any title that is on freehold that is purchased by a foreigner, a
company not wholly owned by Kenyans or property held in trust whose beneficiary
is not Kenyan changes to leasehold.
6. The current condition of the real estate market in Kenya
Conditions in the property market change from time
to time. If you are selling a house, high property prices are a good condition.
On the other hand, if the property prices are low, it is a good time to buy and
a bad one to sell. Thus, before you invest in some real estate in Kenya,
perform some research to find out the prevailing market
conditions.
The Important Take Away
Buying property is
every Kenyan’s dream and rightfully so. And is
very rewarding. Numerous people have made a fortune investing in real estate.
If you want to join the ranks of successful real estate investors, the elements
above are the ones which you should actively consider. They can make the
difference between a few thousands in returns or millions. If there is a factor
we may have missed, let us know in the comment below.