Owning Land in Kenya
Foreigners may own land and property in Kenya, on a leasehold basis with maximum 99-year leases that are transferable, and can be extended on application when they lapse. Foreign companies may also buy land and property, but again on leasehold basis only. A company is considered foreign owned if even one of its owners is not Kenyan. Farmland can only be sold to Kenyans, although foreigners or foreign companies may then rent that land for an agreed period.
Investors can acquire land through direct purchase on a willing seller, willing buyer basis, by applying to the National Land Commission, the national Government, or a county government, or with the assistance of Kenya Investment Authority. There are regular reports of land buyers falling victim to scams where they purchase land from individuals without the right to sell it, who present fake or duplicate Title Deeds. Caveat emptor: consult an appropriate Kenyan legal firm, and ensure that the ownership of the land to be acquired has been confirmed with a search at the Land Registrar. This can be done at the Ministry of Lands and Physical Planning, which will need to see a copy of the existing Title Deed, and copies of the applicant’s passport and PIN.
Due diligence will verify who owns the land or property, and will highlight to the buyer any pre-existing financial or legal claims that could have a bearing on the seller’s ability legally to transfer the property, or could carry over to the buyer.
The Kenyan Property Market
Gross rental yields on Nairobi apartments are moderately good, at around 6.5 per cent to 7 per cent. Yields on houses are lower, at 5 per cent to 5.4 per cent. According to Hass Consult, property values in Kenya soared by 357 per cent from 2000 to 2014. A three-bedroom apartment in an elite district of Nairobi can be bought for around
€200,000. A three-bedroom house may go for €420,000, and a five-bedroom house may fetch in excess of €750,000. The majority of foreign workers rent accommodation: a three-bedroom apartment may cost roughly €1,250 a month to rent, a four-bedroom house around €1,800 a month, and a larger six-bedroom home in a very upmarket estate will cost in excess of €3,000 a month. Utility, staff, and security costs are not included in rent.
What You Must Know Before Investing in Kenyan Real Estate
While investing in Kenyan property is currently considered to be extremely attractive, it is important for any investor to undertake a thorough due diligence before any purchase. It is generally recommended to use top-tier conveyance lawyers to undertake comprehensive title searches and background checks. The lands department is currently transforming from manual to computerised records and this exercise is fundamentally important for ongoing progress and transparency. It is advised to also double check the property zoning classification and whether all land rates and taxes have been paid up to date. It is also necessary to check whether there are any legal caveats lodged against the property or any pending ownership disputes. Property purchases, even if straightforward, generally take a number of months and typically exceed six months. There is a vibrant property agent market but again legal advice on current agent fees and terms is recommended. Mortgages are still not common in Kenya due to the prevailing high interest rates, but mortgage providers are increasingly working on providing pay-back flexibility and lower interest rates. The market is expanding for mortgage house/property insurance providers and it is considered wise to insure such assets.
Property Investment Options in Kenya
Purchasing residential property, particularly town houses or apartments is relatively straight forward in Kenya. Purchasing land is more complicated and it is important to check the classification (residential, agricultural, industrial, other). Residential land in urban areas is most easily purchased. It is advisable when purchasing vacant land that it is securely fenced/walled off and connected to access roads, electricity and water, where possible. Commercial real estate can also be readily purchased and potentially offers more reliable income than residential property in Kenya. Additionally, the law currently protects commercial property owners relatively well with a minimum five- year contract and a clause for annual rental increments. However, the trends change quickly in Kenya and any investor is advised to undertake research.