7 Steps to Invest in Real Estate in Kenya

If you intend to venture into Kenya’s real estate market, here are a few easy-to-follow tips and ideas to help you successfully start your investment journey.

1. Study and seek guidance

The Kenyan real estate investment landscape is intricate due to the numerous legal and due diligence procedures involved.

There is a lot to be learned, and it is essential to educate yourself thoroughly. It is advisable to network with other investors and other players in the sector, since they can offer very insightful advice about the local market.

You can also gather a great wealth of information from the Internet by reading e-books that offer guidelines on how to buy, develop, rent or sell property.

More importantly, take a cue from successful real estate investors in your area and model your ideas in line with what they have done.

2. Follow the rules

Cutting corners to save on construction costs or to hasten the construction process might lead to the loss of an entire investment.

It is important to follow the national government, county government and National Environment Management Authority (Nema) construction regulations and by-laws to avoid the chances of your property being demolished in the future.

You must ensure that a proper survey is done before development commences to avoid encroaching on public land and standing in the way of infrastructural development.

3. Invest in secondary towns

The increasing number of office blocks and shopping malls in major cities in Kenya has resulted in an oversupply of office and retail space, especially in Nairobi.

With supply surpassing demand, the overall returns in the industry have gone down, which means there is a need for investors to target smaller towns.

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4. Land ownership

Land is arguably the only asset where you are guaranteed that its value will almost habitually appreciate.

There has been a phenomenal increase in land values in major towns and their satellite townships, a trend that is expected to continue in the years to come.

It is, however, worth noting that real estate is not a get-rich-quick type of investment, and in some cases, it may take years before the land appreciates.

5. Invest in low cost housing

According to a report by Hass Consult there is an oversupply of high-end homes, resulting in a decline in rental income for the majority of investors.

The market segment that can afford the high-end houses is quite small, and most of them have already bought the houses that they need, thereby leaving a lot of unoccupied units.

On the other hand, there is a growing middle class, which has created a huge need for low-cost, affordable housing.

The price of land is very high, which means a developer who wants to put up low-cost houses has to construct apartments instead of detached units to maximise returns on his piece of land.

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Apartment units priced at below Sh5 million are in high demand and will continue to be, since the market segment that has such purchasing power is large and still growing.

Furthermore, the government has introduced tax incentives for developers who are putting up 400 or more units of low-cost homes in a bid to curb the housing deficit being experienced in the country.

6. Invest in skilled labour

Building collapses have become a common occurrence in Kenya’s urban centres, resulting in huge financial losses and the loss of lives.

According to a survey conducted by the National Construction Authority in 2015, buildings often collapse due to poor workmanship and the use of substandard goods.

The report indicated that only a paltry 30% of construction workers in the country are skilled – a situation that leads to a shortage of skilled labour, which in turn has raised the wage bracket of the professionals in the industry.

As a result, some developers opt to go for the cheaper semi-skilled workers in a bid to make some savings, which is just a case of being penny wise and pound foolish due to the risks involved.

7. Conduct due diligence

Instances of individuals purchasing land whose title deeds later get revoked have become common in most urban parts of the country.

Regardless of who you are buying land from, including family members and friends, be sure to verify the authenticity of the property.

RELATED: How to Outsmart Real Estate Conmen in Kenya

Enlist the services of professionals in the Kenyan real estate industry for title deed verification to avoid getting into unscrupulous deals and losing all your hard-earned cash or credit.

Considering how costly real estate investments are, it is always better to be safe than sorry.

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