Table of Contents
- 1 Real Estate Companies in Kenya
- 2 Finding your niche in real estate in Kenya
- 3 Investment options in real estate in Kenya
- 4 Investment vehicles in real estate in Kenya
- 4.1 Property in Kenya: The REIT way
- 4.2 Property in Kenya: The build, operate and transfer method
- 4.3 Property in Kenya: The ‘chama’ approach
- 4.4 Property in Kenya: Property flipping
- 4.5 Property in Kenya: Wholesaling
- 4.6 Real Estate Companies in Kenya
- 4.7 List of Real Estate Companies in Kenya
- 4.8 Real Estate Companies in Kenya Video
- 5 Real Estate in Kenya News
- 5.1 The pitfalls of real estate in Kenya
- 5.2 Real Estate in Kenya – Runaway land prices
- 5.3 Real Estate in Kenya – Inadequate infrastructure
- 5.4 Real Estate in Kenya – Unethical practices
- 5.5 Real Estate in Kenya – Inefficient land governing bodies
- 5.6 Real Estate in Kenya – Bureaucracy
- 5.7 Real Estate in Kenya – Corruption
- 5.8 Real Estate in Kenya – Unclear zoning regulations
- 5.9 Real Estate in Kenya – Insufficient government incentives
- 5.10 Real Estate in Kenya – Obstacles to catering for low-income groups
- 5.11 Real Estate in Kenya – Developers’ association counts gains as it turns 10
Real Estate Companies in Kenya
Real Estate Companies in Kenya: Over the years Kenya has remained one of the most desirable African countries to choose to live in, with properties in Kenya continuing to attract international buyers.
With its distinctive Indian Ocean coastline, savannah grasslands, arid bush and mountainous forests, houses for sale in Kenya attract buyers who love nature at its finest.
Opportunities for developing business in the eco-tourism industry are in abundance, while Kenya’s economic and cultural hubs – Nairobi and Mombasa – offer ample opportunity for real estate development and investment.
With access to unrivalled property for sale in Kenya, Softkenya is expertly positioned to help you in your Kenyan property search.
Finding your niche in real estate in Kenya
Investing right in the property business is a skill that takes time to learn but which, if mastered, can guarantee you a comfortable life because you will be able to successfully manipulate your assets to get maximum profits. However, a common problem many first-timers have is deciding on the type of real estate they should put their money in.
“We get many clients who have spent the better part of their adult lives savings with the hope of investing in the property sector but when the time comes, they are often unsure how to go about it since they do not fully understand the dynamics of the industry,” says Mr Gilbert Kibire, the CEO of Icon Valuers Ltd, a real estate firm based in Westlands, Nairobi.
“There are different ways of making money when dealing in property,” notes Mr Kibire’s colleague, Martin Cheboror. “It is up to the investor to choose a niche they are comfortable enough with to sink their teeth in.”
According to valuer Paul Kiome Matumbi, when deciding on the type of real estate to venture into, you need to consider the location and size of the land, as well as the envisaged profits and the time you are willing to wait to recoup your principal capital.
When deciding on the niche to invest in, the three real estate insiders told DN2, it helps if an aspiring investor understands the two ways in which property pays back. The first, current income, refers to the money you will be collecting from your property monthly or yearly as rent after you have deducted all the expenses.
Second, a good investment should also appreciate handsomely with time so that you can always make a considerable profit if you decide to sell it later on. So it is advisable to consider both the expected current income and appreciation rates before entering into a property deal. However, avoid the temptation to invest in too many areas.
“The most successful investors are those who choose one or two niches and take time to master them,” says Mr Kiome, the CEO of Nairobi-based real estate firm Prudential Valuers.
Investment options in real estate in Kenya
Real Estate in Kenya: Your own home
According to Mr Matumbi, building one’s home should be the stepping stone to creating a budding real estate portfolio.
“Even the birds of the air and the ants on the ground build their own nests, so why should a human being continue paying rent for the rest of his life?” he wonders.
“A home is a wise investment because even if you do not plan on selling it soon, it still has monetary value and it can be used as leverage when seeking loans from financial institutions. The appreciation aspect of it cannot be ignored because if you decide to sell your home later on, it will certainly be a worthy investment,” Mr Matumbi adds.
Even when you don’t have enough money to buy or build your home, consider taking a mortgage. Rent payments go to the landlord’s pockets and at the beginning of the month, one doesn’t have anything to show for it. Mortgages, on the other hand, go towards increasing your equity in your home and in the end you will have a house to show for it.
“The comfort of having your own home gives you peace of mind that enables you to confidently venture into other real estate investments,” the valuer says.
Real Estate in Kenya: Residential houses
According to the National Housing Corporation estimates released last year, Kenya has an annual housing deficit of more than 200,000 units. To ease the problem, 150,000 new units are needed per year. If you decide to spend your money easing this deficit and say, build an apartment complex, you will be making hay while the sun shines.
“Residential property,” Mr Cheboror says, “is one of the best real estate investments when it comes to long-term income. Even after recouping the principal investment, most developers prefer to hold on to their property indefinitely.”
Noting that residential units are easy to rent, sell and finance, Mr Kibire says that they can serve as both solid investments as well as personal residences because the investor could decide to live in one of the units.
However, do not not let your experience as a tenant fool you that it is easy to manage rental houses. According to Mr Kibire, some developers end up under-estimating the costs it will take to manage their building.
“Carefully screening your tenants and appointing a competent manager will go a long way in shielding you from losses,” he says.
Real Estate in Kenya: Commercial investments
Mr Matumbi defines this as putting up property with the aim of leasing it to business outlets. He points out that, with shopping malls now the craze, retail property is proving increasingly more lucrative than residential property. However, he is quick to caution that the sector is not recommended for beginners, unless one has a solid financial base.
To get it right, Mr Matumbi advises, you should approach an anchor tenant for a contracted deal before the construction begins. An anchor tenant, usually a large-scale retailer, is a big business whose presence on your property will draw other commercial tenants.
“Most investors negotiate with anchor tenants so that they (the anchor tenants) finance part of the construction costs. The anchor tenant then recoups their contribution by not paying rent for a number of years,” he explains.
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Real Estate in Kenya: Industrial property
These include depots, warehouses, distribution centres and other property set up for use by light industries such as creameries and bakeries.
Mr Kibire points out that industrial property requires relatively smaller capital to set up since their designs are usually not complicated.“Provided you get the location right, they are particularly lucrative because the landlord thrives on long-term leases with a single big tenant, so the problem of defaulting on rent is minimised,” he adds.
While noting that the minimum period for leasing industrial property in Kenya is five years and a month, Mr Matumbi concurs that it is a viable option for “small” developers because county governments are currently encouraging industrialisation. However, he notes that the bureaucracy involved in change of user and getting the relevant permits can be discouraging. “There have even been cases where, after an investor has got all the relevant permits, local residents have lobbied the authorities to veto the setting up of the industrial property,” he says.
Real Estate in Kenya: Raw land
This is just a parcel of land without any development on it. When buying raw land, it is important for speculators to watch out for catalysts that can work in their favour in pushing up the price. Mr Cheboror says a catalyst could be an upcoming external development, most often a road.
Raw land can also be leased or rented to provide cash flow. To get even more from it, you can subdivide it and sell it in smaller units.
Investment vehicles in real estate in Kenya
AN ASPIRING REAL estate investor can use a number of strategies to gain a foothold in the industry.
Property in Kenya: The REIT way
Real Estate Investment Trusts (REITs) are an indirect way of investing in real estate and ideal for those who do not wish to be actively involved in the management of the property.
“A REIT is an investment entity that brings together many small investors who buy shares in the entity. The entity then purchases commercial real estate and distributes most of its income to the investors on a monthly or yearly basis according to individual contributions,” explains Mr Martin Cheboror, a valuer.
Since they are listed in the Nairobi Securities Exchange (NSE), it is in REITs that real estate and the stock market meet.
“The returns with REITs are relatively low since they involve less risk, but REITs are recommended for people who want to invest in property with minimal capital,” Mr Matumbi offers.
Property in Kenya: The build, operate and transfer method
Sometimes, the owners of prime land find themselves disadvantaged in that do not have enough capital to optimally develop their land. In such cases the land owners can consider the build, operate and transfer approach. This is where the land owner partners with a venture capitalist who builds on the land. The two parties then enter into an agreement whereby the venture capitalist operates the property for a number of years to recoup his investment, after which ownership of the property reverts to the land owner.
Citing a recent report that ranked Nairobi as Africa’s top foreign direct investment (FDI) destination, foreign investors are increasingly looking to get into joint ventures with local land owners.
“In foreign markets such as Asia and Europe, capital gain is low and unattractive. Investors from these countries bring their money to Nairobi with the hope of making bigger returns and when they come here, they look for ready land where they can operate for a few years before cashing out and exiting the market.
Property in Kenya: The ‘chama’ approach
“There is power in numbers,” notes Mr Kibire, who acknowledges that his job has made him a member of several chamas that have invested heavily in real estate as joint ventures.
“What I have learnt is that when putting together an investment group, it helps to have a diverse membership, ranging from lawyers to accountants and even real estate agents. This will provide you with a ready pool of crucial expertise and save you a fortune on consultation fees,” he offers.
A good investment group should have a constitution with clear guidelines explaining the methods through which the group plans to invest its money.
He says although disagreements are inevitable in chamas, they should be encouraged since they help forestall risks and assist in critically analysing a deal to filter out bad investments.”
Property in Kenya: Property flipping
Flipping involves buying real estate with the intention of selling it within a short time (usually a few weeks) for profit. It is a lucrative field but it can be taxing in terms of time and effort as it requires a wholly hands-on approach.
“People have made successful careers out of this highly speculative trade, but bad deals are rampant as well,” says Mr Kibire. To avoid bad deals, he advises those getting into the flipping business to begin with the end in mind.
“We teach our clients the principle of making profits before they even buy the property. With flipping, you need to have an idea as to whom you’ll sell the property to before you even buy it,” he explains.
To reap maximum financial gain from flipping, an investor needs to understand the imperfect nature of the property market. While an investor can find a land owner willing to sell his land for Sh2 million shillings, he or she can resell the same land for Sh5 million the very next day.
Speculators should consult with real estate valuers to determine the highest amount for which they can dispose of their property.
Property in Kenya: Wholesaling
In real estate circles, wholesaling refers to the practice where a speculator spots a real estate deal and enters into a binding contract to acquire the property from the seller after putting down a little or no money at all. The speculator then sells the contract to another buyer. The difference between the contracted price and the amount paid by the buyer constitutes the wholesaler’s profit.
A vital tip for a wholesaler is to add a clause in the purchase contract that allows him or her to back out of the deal if he can not find a buyer by a certain date.
According to Mr Matumbi, the practice is gaining momentum with houses that are selling off-plan, with speculators only commiting to buy the property and then hunting for buyers as the property comes up.
Wholesaling can be a great way for those with limited capital to gain entry into real estate.
Adopted From the Daily Nation
Real Estate Companies in Kenya
[catlist id=1686 numberposts=250 orderby=title order=asc pagination=yes catlist template=ol]Property and Real Estate Companies in Kenya
List of Real Estate Companies in Kenya
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Real Estate Companies in Kenya Video
Real Estate in Kenya News
The pitfalls of real estate in Kenya
Updated on: 13.10.2016
Investing in real estate in Kenya is considered a good investment by individuals and firms looking for stable, long-term returns.
“The high rate of urbanisation, coupled with the ever-ballooning middle-class, has ensured that the real estate sector continues to make a significant contribution to the country’s GDP,” says Mr Mucai Kunyiha, the chairperson of the Kenya Property Developers Association (KPDA).
However, it is not all rosy for property developers. Mr Daniel Ojijo, the Managing Director of Villa Care Kenya and a big player in real estate, says developers have to deal with a host of challenges, ranging from corruption at inefficient government offices to poor infrastructure such as roads.
Below are some of the hurdles one can expect to encounter in Real Estate in sector in Kenya:
Real Estate in Kenya – Runaway land prices
“It goes without saying that developers need land in order to create new wealth and infrastructure,” Mr Kunyiha says. However, land prices in Kenya’s urban areas are skyrocketing at rates that cannot be sustained by the economy for long.
“In most circumstances, for a developer to make profit, they have to ensure that the cost of land accounts for 15-20 per cent of the total construction cost. For example, if a developer buys a piece of land at Sh50 million, they have to ensure that they put up a development whose value is above Sh300 million. This forces developers to put up high-rise buildings even in locations previously designated low-density residential areas,” Mr Kunyiha says.
Even then, it takes many years for proprietors to recoup their investments.
“The government should come up with measures to control land prices in urban areas to ease the pressure on property developers,” suggests Mr Ojijo. He further proposes that county governments consider giving land either for free or at subsidised rates to developers to stimulate development .
Real Estate in Kenya – Inadequate infrastructure
Infrastructure such as access roads, electricity, as well as the availability of water, do a lot to help bring down construction costs, says Mr Ojijo.
However, Mr Gikonyo Gitonga, a director at KPDA, observes that there’s a shortage of properly serviced land in the country, especially in the counties.
“Developers usually end up installing such services themselves. If one factors in the money used to build an access road to the final cost of building an apartment, the consumers will ultimately pay for the building through the nose,” Mr Gitonga offers.
He says that is why many people shy away from setting up meaningful developments in rural areas. In contrast, investors are elbowing each other for expensive pieces of land in urban areas such as Nairobi because of the existing supporting infrastructure that brings down the cost of construction.
Real Estate in Kenya – Unethical practices
The term “private developer” tends to evoke rather negative feelings among the public. This is because in many cases, private developers have been associated with unethical practices such as land-grabbing, building on riparian land and cutting costs at the expense of quality during construction.
The situation is exacerbated by the occasional collapse of high-rise buildings around the country, which often lead to multiple deaths.
“When such an isolated incident occurs, it only serves to give the entire development industry a bad name,” Mr Mucai acknowledges. “When KPDA was formed, one of the first items on our agenda was to come up with, and promote, tougher building standards and regulations for our members. We have worked with the National Construction Authority (NCA) to maintain building standards in the country high and ensure that developers are held accountable for their mistakes,” he adds.
There’s a shortage of properly serviced land in the country, especially in the counties. Developers usually end up installing such services themselves. If one factors in the money used to build an access road to the final cost of building an apartment, the consumers will ultimately pay for the building through the nose.
Real Estate in Kenya – Inefficient land governing bodies
Land administration in Kenya has always been chaotic, Mr Gitonga laments. “For close to two decades, we did not enact any significant land laws and this led to the chaos that is still plaguing the sector. The passing of the new Land Act in 2012 brought a semblance of sanity to the industry, but the way many systems run is still archaic and deplorable,” says the KPDA director.
Mr Gitonga lauds the move by Land Cabinet Secretary Jacob Kaimenyi that saw him disband and then re-appoint all land control boards representing 57 registries. “The former land control boards were a monument to laxity and high levels of corruption; it was clearly time for reforms,” he says.
But KPDA regrets that even now, the inefficiencies that have plagued the Ministry of Land, the National Land Commission and the land control boards continue to haunt developers. Unscrupulous Kenyans have taken advantage of the inefficiencies of our systems to sell land with dubious title deeds, often in collusion with officials from the land ministry.
“It is painful for an aspiring developer to invest millions of shillings in a piece of land, only to spend years in court arguing about the validity of its title deed,” Mr Gitonga says.
Real Estate in Kenya – Bureaucracy
Selling land in Kenya, Mr Ojijo complains, can take up to six months or even longer. He attributes this to the complicated legal requirements that make transactions drag on needlessly. He says ideally, a simple land transaction should take between 14 to 30 days.
County governments do not help matters when it comes to fast-tracking land processes, with a simple matter like obtaining a land-rate clearance certificate taking up to two months.
When it comes to construction , Mr Ojijo says, sometimes builders have to seek similar permits from their county authorities and national bodies such as the National Environment Management Authority (NEMA) and the National Construction Authority (NCA).
Some approvals can take up to two years, and both the country and developers lose money during this period, when no meaningful development is taking place.
To get rid of bureaucracy, Mr Ojijo suggests that the government immediately establish a national housing authority, which should be given the mandate to issue all construction-related permits. With such a body, he says, a developer might be able to get all the necessary permits in 14 to 30 days.
Real Estate in Kenya – Corruption
The other side of the bureaucracy coin is corruption, which is pervasive in every sector of the property industry, according to Mr Kunyiha. “Officials of several government bodies usually entice developers to pay bribes with promises to help them cut corners and save time,” he says.
“One step towards eliminating corruption and speeding up development is automating the operations. We need to do things electronically at the approval offices because the less human interaction there is between developers and government officials, the lower the opportunities for demanding or offering bribes,” Mr Kuhinya adds. He commends the Nairobi County Council for automating construction permit processes in Nairobi, adding that other counties should follow suit to reduce corruption and delays.
Real Estate in Kenya – Unclear zoning regulations
Developers are increasingly being accused of flouting zoning regulations, especially those who set up high-density commercial establishments in areas designated low-density residential areas. Mr Gitonga blames the situation on weak zoning regulations.
“In many areas, the zoning rules allow different interpretations, and this makes them open to abuse. As such, developers often find themselves in court seeking a magistrate’s opinion on the rules. As KPDA, we are constantly vouching for transparent, open and predictable rules,” Mr Gitonga says. He also blames corruption at the approvals’ office for the propagation of this vice.
However, he warns that as more people move to urban areas, most of the zoning regulations will cease to make sense. “With increased urbanisation, the economy of an area is usually forced to expand. This pressure on the economy, coupled with reduced building space in towns, will force developers to put up high-rise apartments and more commercial establishments to cater for the increased population and economic expansion respectively,” he explains.
In cases where disputes arise between the neighbouring community and a developer, the KPDA encourages the developers to settle their differences out of court by engaging in dialogue with them.
“We try to educate community members on the benefits that such a development could eventually bring to their area,” says Mr Kunyiha.
Real Estate in Kenya – Insufficient government incentives
The country’s housing requirement is estimated at 200,000 units a year, with an annual deficit of 150,000 units.
While delivering the Budget in June this year, Treasury Cabinet Secretary Henry Rotich proposed tax concessions for property developers who build more than 1,000 houses a year, reducing their corporate tax from 30 to 20 per cent. This was later reduced to 400 units in the final financial Act.
This measure is aimed at encouraging developers to build more houses in order to reduce the deficit.
Mr Ojijo, however, doubts that the measure will have any significant benefits since very few developers have the capacity to build 400 units a year. The policy, Mr Ojijo argues, would make more sense if the threshold were lowered to 50 units.
“If the government is serious about its mandate of providing affordable housing, then it needs to set up a special committee that will come up with incentives that benefit even small-time developers,” he says.
Real Estate in Kenya – Obstacles to catering for low-income groups
“The government should declare housing as a national crisis for the low-income groups,” asserts Mr Ojijo. “Due to the high cost of land and insufficient government incentives, developers are giving a cold shoulder to low-income earners and concentrating on developing houses for the middle and upper classes because these are the niches in which they can make a profit,” he adds.
He says low-income earners, need alternative modes of financing to enable them to afford decent housing. “If the government can provide mortgages to civil servants at an interest rate of 3 per cent per annum, why can’t it make it possible for low-income earners to access mortgages at say, 6per cent?” he wonders.
Real Estate in Kenya – Developers’ association counts gains as it turns 10
Although they contribute significantly to the country’s economy, for a long time property developers lacked a platform they could use to collectively address the problems in the sector.
“When a developer wanted to engage the government on tax concessions, for instance, it was tough because they had to do so as individuals,” recalls Mr Daniel Ojijo, the Managing Director of Villa Care Kenya, a local real estate firm.
So together with his fellow developers, Mr Ojijo formed the Kenya Property Developers Association (KPDA) in 2006, and was elected its first chairperson.
“At the time, the Nairobi City Council had banned multi-dwelling developments in prime areas. This was an insensitive policy as it did not take into account the city’s growing population. One of our first achievements as KPDA was to engage the county council and have the ban lifted. This brought a lot of quality development to prime areas around the city,” Mr Ojijo says.
The current KPDA chair, Mr Mucai Kunyiha, recalls a time when the Nairobi County Government increased building levies.
“Together with the Architectural Association of Kenya (AAK), we approached the Governor, Dr Evans Kidero, and were able to get a reprieve after he agreed to reduce the levies.
The association, which has 110 members, boasts of being an important voice in the construction sector as it has been able to engage bodies such as the National Construction Authority (NCA) andas well as the the Ministry of Land, Housing and Urban Development in the formulation of the National Housing Policy.
Despite these gains, however, the association not been able to rope in small-time private developers who set up single projects, mostly their own homes. This group of property one-timers still lacks a collective body to advocate for their needs.
“Our members are companies that engage in multiple developments at a go because we are looking into solving recurrent problems in the industry. We are trying our best to get more people to go into construction as a business,” says Mr Kunyiha.
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