Which Are The Best Real Estate Investment Opportunities In Kenya In 2018?
Which Are The Best Real Estate Investment Opportunities In Kenya In 2018?
July 18,2018..A good year for real estate investors. Yes, you heard it right! Kenya is the top investment choice for both local as well as foreigner investors with the most attractive investment destinations of the times.
Mr. Kfir Rusin, EAPI (East Africa Property Investment ) Summit Managing Director Says “Kenya has become a lightning rod for investment as both local and foreign investors have looked to diversify their investments across multiple market segments from retail, industrial, housing and office space.” – as reported in Business Today Kenya.
After experiencing a slowdown in 2017, there is optimism that the market will pick up in 2018, however. Nairobi is a key regional centre that offers good prospects for real estate investors. It is a real estate hub comprising of top notch brokers, agents & real estate developers in Kenya
Are you a keen Kenyan real estate investor looking for opportunities to invest in real estate in Kenya? In this article, we will reveal all the Real Estate Investment Opportunities you need to Venture Into Real Estate Business In Kenya.
Real Estate & Property Investment Options in Kenya
There are three major investment options in Kenya Real Estate Market 2018 are:
🎯 Buying And Selling Land For Profit In Kenya.
Buying land or Investing In Land In Kenya is not always the right investment in Kenya. If you buy a piece of land with the thought of selling it after a few years, there is no guarantee that its price will only rise with the growing years. Typically the land economics says something different.
As per thumb rule of land economics, “If you buy a piece of land and its appreciation rate is slower than the rate of inflation, then you are actually making a loss on that investment, even if you sell the land for a profit”.
Due to inadequate understanding of property market, people end up losing money by purchasing land. This is a huge investment business so a person must be aware of the stats that a location’s property market will soon decline and, therefore, avoid buying land there when the only aim of buying land is to earn profit by selling it after a few years.
🎯 Buy Land and Build property for Rent or Sale.
Building property is another property investment avenue in Kenya. Building any property like school, college, hospital or even apartments may seem a profitable investment but it requires a lot of expertise and huge capital investment. In fact, if one has the finances, one can buy land and build residential units which in future will offer higher returns when resale or to let.. This strategy is capital intensive.
🎯 Investment in R.E.I.T:
Among the three options, investing in joint venture or R.E.I.T is the best. The investor doesn’t have to physically deal with architects, quantity surveyors, structural engineers etc as in the case of buying land then developing.
Another advantage with the joint venture option is that the pooling of resources from like minded investors can help to reduce the capital required from borrowing from banks significantly, hence an easier and cost effective source of development financing.
The investor also benefits from shared risk where property and conveyancing lawyers , land surveyors and land valuers have advised on the conveyancing process , ensuring the land is clean and without any encumbrance, ready for development.
🏘️Low Income Housing Development –
A significant decline in supply of low to middle income housing is spotted in the Government’s plan. As per statistics, development of a million units of public rental housing is required over the next five years. This sector is undersupplied because margins remain extremely thin. If the government creates the relevant incentives to widen this margin, Low income housing could be a boom market for 2018.
🏘️Existing Commercial Properties –
A major upswing in office enquiries is therefore expected in 2018. Now that 2018 is expected to be a rebound for real estate investments therefore, businesses looking to move office are firmly adopting the “wait and see” election approach. Presently the existing commercial properties backed with impatient capital is proven to be reasonable. A right property purchase should be able to provide 12%+ yields over a 5+ year horizon.
🏘️Student Housing –
We have seen a hold back in the business potential of student accomodation in Kenya though it may yield high returns.Student housing in Kenya is now a powerful alternative asset which if developed attractive will definitely guarantee tenanting., Hence, the development of student accommodation will prove to be the next big thing in the real estate.
🏘️Warehousing and Factory Development –
The slow investment in the industrial sector has lead to a chronic shortage of good warehouses that has presented new opportunities for growth in the country. The increase in manufacturing will increase demand for warehouses. Long lease warehousing is one of the most attractive Real Estate investment opportunities in the continent. Thus, setting up warehouses and industries will be an indication that industrial sector could be the next frontier for growth in Kenya.
🏘️Secondary City Retail –
Nairobians now are enjoying ample options for consumers needs like supermarkets, outlets and a broad range of shopping options are available in urban cities of country, however the majority of the small towns remain undersupplied. The county retail must be customized to fit its demographics. We have seen several untapped opportunities in the region’s secondary cities and towns to better serve consumers. Increasing urbanisation should fuel growth in Kenya’s retail sector as there are significant growth opportunities in Kenya’s second-tier cities.
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Property Investment in Kenya
Kenya’s real estate sector is accelerating at a rapid pace making a substantial contribution to the GDP recorded as 13.8 per cent in 2016 rose from 12.6 in 2010 by the Kenya National Bureau of Statistics’ (KNBS) under its annual Economic Survey 2017. The construction industry grew by 9.2 per cent in 2016 from an expansion of 13.9 percent registered in 2015.
Planning to invest in Real Estate Kenya? Here is what all you need to know about, before you start:
- StartUp Capital
- Real Estate Training
- Property Evaluation
- Make the Down Payment
- BuildUp Equity
Let’s discuss in detail.
☀️StartUp Capital Required
Startup capital refers to the money required to start a new investment. To begin with, you have to start building up startup capital. You should start saving a fixed amount every month from your wage. Why not set up an automatic transaction of your salary to a savings account? You can also enquire loan offers for property investment in local banks.
Hence, get ready with an effective financial plan that will enable you to contribute at least 25 percent of the down payment on the residential real estate you’re planning to invest in.
☀️Real Estate Training – Get trained
As a beginner in the real estate industry, it is necessary to be well aware of the latest Real Estate trends and opportunities available in the Kenyan Real Estate market for new investors, only then you can make a smart move. Therefore, find some well-reputed real estate investors that offer real estate seminars to help you learn more about property business and its essentials.
Besides, you can also purchase books on real estate and read more about real estate market in Kenya.
Before you invest into any property, you must know about property assessment. Hire an appraiser who has good experience of property sector. Thus, you can seek guidance from him in evaluating the value of a particular property.
This is important because this will help you understand the financial viability of the property.
If the value of the property meets your standards, you can head on over to due diligence to ensure that the property you’re investing in is free from any type of encumbrances. Once verified, you can move ahead with the down payment. Once the payment is done and the property is handed over to you, this is entirely your decision to either rent the property or build it anyways.
Now, the final step is building up equity for your investment. How will you manage to build this up? Well, one of the solution is to let your property and get mortgage paid by the tenant. Equity is basically the amount of the property you own whether it is a home or just a land. It is important because if the value of home increases which means debt decreases and thus, equity again rises up and you can utilize this amount for investing in other property. This will create a foundation for a successful real estate business. But wait wait wait….Make sure while you are building it up, you definitely have contingency purposes.
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