Buying Real Estate Property in Nairobi, Kenya – A Guide

Buy Real Estate Property in Nairobi

Buying Real Estate Property in Nairobi, Kenya – A Guide

August 3, 2018 | By : Hayer One Marketing

Nairobi is a different residential market altogether. Being a fast-growing melting pot and main regional hub with a strong economy, Nairobi attracts international corporations who are looking to buy real estate property in Nairobi, Kenya to set up their headquarters in Africa.

The most rapidly growing sectors tapping into new wealth are:

  • FMCG (fast moving consumer goods)
  • hotel industry
  • technology industry
  • Residential sector

Presently, the Kenyan capital Nairobi is on the radar of many high net worth investors, as reported by the Knight Frank Wealth Report 2017.

Here are the growth distribution stats of Kenya:

  • 4% – look to own homes in Kenya
  • 63% express interest in Kenyan property,
  • About 5% likely to invest in homes in Kenya

As a whole, the country is amongst the top five most popular second home locations for Africa’s super-rich people. However, affordability is still a concern for the locals in the market,

In a country of 48 million people, less than 30,000 have mortgages and this lack of liquidity in the Kenyan property market is a major obstacle. There is optimism that the market will pick up in 2018, however. Nairobi continues to be the key regional center that offers good prospects for real estate investors.

Buy Real Estate Property in Nairobi

Driving force behind the Nation:

From conventional estates to contemporary villas facilitated with all amenities – what is driving this growing trend and how are developers staying ahead of these changing behaviors and perspectives?

Real estate investment in Kenya has become the prime approach by investors when it comes to investing the wealth in Kenya. Their current focus is on locations that offer personal security, the best education for their children, luxurious lifestyle and the greatest opportunities for capital appreciation.

Want to Buy Property in Kenya?

Currently, Kenyan real estate property buying behavior has shifted to high-end villas that are designed and built to world-class standards.  We have prioritized the needs of each homeowner while looking for buying Property in Kenya :

  • an increasingly popular location choice
  • a nearby school, colleges, and hospitals etc.
  • renowned restaurants
  • best-in-class shopping malls
  • golf & Country Club
  • nearby private leisure facilities.
  • pool and gym

By bringing something new to the market, one can attract high net worth domestic and international buyers,

buy real estate property in kenya

🏘️ Market resilience

There are certain factors leading us to believe that the real estate market in Kenya has become more mature, resilient and an ideal investment destination.

Let us describe in detail.

🏘️ Rental growth in Kenya:  An oversupply of prime properties for rent is the reason behind the weaker prime rental growth. This has given more leverage to the tenants to negotiate on the price of the property with landlords.  A dramatic decline of -2.8% in residential rents have been seen in Nairobi during the first half of 2017 which is less than -3.2% analyzed in the first half of 2016. But we expect the prime market to evolve as a mature market in the first half of 2018.

🏘️ Sales:  The prices of Prime residential homes increased by 0.9% over the first nine months of 2017. The prevailing market conditions, coupled with the already high capital values of prime residential homes have however resulted in low transaction volumes.

Previously there was a dropdown of about 1.0% in the first half of 2016.  In the latter half, most financial institutions become unwilling to lend money to the customers due to the introduction of a higher interest rate.

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According to the newest trend in the Kenyan Real Estate, the prime focus of lenders are corporate borrowers and instead of lending money to individuals, they are investing in government bonds. This trend has continued into the second half of 2017. However, despite the slowdown in activity, we believe transactional activity will gain momentum in 2018 as the market stabilizes.

According to the newest trend in the Real Estate market, the prime focus of lenders are corporate borrowers and instead of lending money to individuals, they are investing in government bonds. This trend has continued into the second half of 2017. However, despite the slowdown in GDP, we believe transactional activity will gain momentum in 2018 as the market stabilizes.

🏘️ GDP: Kenya’s proposed GDP growth rate is 5.8% in 2018 which is significantly above Sub-Saharan Africa’s calculated rate of 3.5%, making it an ideal location for local and international investors.

🏘️ Rapid Urbanization: Urbanization has been a significant factor in the development of the country with a growth rate of  4.3% per annum versus a global average of 2.0%. The dominant parameters for urban growth is an expanding middle class and positive demographics such as

high population growth at 2.6% per annum against a Sub-Saharan Africa an average of 2.3%.

Process Of buying real estate property in Kenya:

Buying Property in Nairobi - Process Of buying real estate property in Kenya

Thinking of buying real estate property in Kenya? Our step-by-step guide will take you through some of the key considerations.

🏘️ Finding a suitable property: Typically, the procedure begins when the purchaser starts looking for a suitable property. List out the services given by different reputable real estate firm in identifying a suitable property. Once you enlist all the property agents or top real estate developers in Kenya,  visit their websites to make sure if they fulfill all your requirements. to visit and assess the real estate to ensure that:

  • It actually exists
  • Check out the physical location and nearby boundaries.
  • It meets your needs and expectations such as its location, size, amenities  and access to infrastructure
  • Its conditions are favorable and worth in investment.

Note:  A viewing fee is charged when visiting properties for sale that vary by type and size.

Now that you are all satisfied with the criteria, offer them make a formal offer or expression of interest.

🏘️ Due Diligence: After the vendor accepts the offer, buyer should conduct due diligence to verify  the ownership and other material aspects pertaining to the property and documentation etc.  This is very important to verify that the said owner is truly the titleholder of the property.

  • To carry out the search, you are required by law to file a copy of the title deed and a search application form and lodge it at the registry.
  • The charges for requisite search are Ksh 500.
  • Land registry obtains the results within 2-3 days.

As a result, you will come to know:

  • The registered title holder of the property
  • Property size
  • Any pending issues registered against the property such as court orders, caveats and prohibitions, etc.

On the other side, the vendor also conducts due diligence on the  buyer. If the due diligence proves to be successful, both the parties instruct their advocates to proceed to the legal work.

🏘️ Legal Contract: The contract procedure very slightly based on the type of property , whether it is a ready-to-move in  house, land, or an off-plan property. In general, the buyer pays the deposit in order to complete the transaction within the closure period. A;though the closure period is normally 90 days i.e.  3 months from the date of signing the sale agreement, parties can mutually decide any closure period that suits them.

In the end, buyers pay a percentage of the purchase price in equal installments until the project is completed.

🏘️ Sale Agreement:  As soon as the agreement is signed by both the parties,

the deal becomes legally binding and enforceable under the law of contract. The

buyer is required to pay a deposit of at least 10% of the purchase price (or other amount as may be agreed by both parties) upon signing the agreement.  In the presence of legal team, both parties discuss about the negotiations on the terms of sale. This discussion entails:

  • Negotiations on the price of property and terms of payment.
  • 10% of the total amount is paid upfront as down payment and the balance is paid when the sale transaction is complete.
  • Agreement of terms by both parties set ground for preparation of a sale agreement by the seller’s advocate, who then seeks approval from the seller.

A sale agreement contains:

  • Terms of sale
  • Purchase price
  • Terms of payment
  • Payment completion period
  • Completion documents that facilitate the property transfer
  • Law Society Conditions of Sale are often included

When the buyer and seller, both accept the sale agreement, the procedure is executed with the signatures of both of them. Finally, the deposit is handed over to the seller’s advocate as stakeholders pending completion of the transaction in accordance with the terms of the sale agreement.

🏘️ Completion: On the completion date, buyer is required to pay the balance amount of the purchase price in exchange for the completion documents of the property from the seller.

As the buyers receives the completion document, they make arranges for Stamp Duty.  A stamp duty of about KSH 200 is then obtained from lands office to ensure that in case of a dispute, the signed documents are admissible to court.  And subsequently stamping of transfer documents. Thereafter, they proceed to lodge the property for registration in favor of the buyer.

🏘️ Transfer to Property: After the registration the process, the seller’s advocate is legally permitted to release the full proceeds of the sale to the seller. Consequently, the buyer is officially handed over possession of the property and becomes the new legal owner. The argument for this is based on the fact that the seller’s lawyer does registration for all the leases on behalf of the buyer.

The seller is responsible for acquiring every requisite completion document needed to effect property registration to the buyer.

The buyer is then liable for the stamp duty fees payable to the Kenya Revenue Authority. The fee is on a scale capped at a maximum of 3% of the property’s value.

The seller must apply for property valuation by lodging signed valuation for stamp duty form and transfer of property form to the Land Office.

A stamp duty declaration, assessment and pay-in slip is then filled at Lands Office.

🏘️ Registration:  When the buyer obtains the registered property transfer, the law advises verifying registration of the same by conducting a property search. Buyers are generally

responsible for the cost of registration of titles in their name(s).

Now the property is legally owned by the buyer so he can reconstruct it or rent it or whatever he wants.

Further Reading