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Buy land, they are not making it anymore
by Hezron H.N Nyawachi
2010-11-27 09:12:31
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Real estate has become one of the most profitable counters toppling all stocks in investment circles in Kenya while at the same time topping all other types of investment in the past ten years in terms of investment returns. Commercial banks have increased their loan portfolio in home loans more than threefold in real estate and in this year alone, this third quarter of the year has seen growth in real estate in leaps and bounds compared to the first quarter of the year, a fact pegged to the increased optimism on the economy and a growing middle class that is growing richer and richer.

In 2003, for instance, an average property in Kileleshwa cost about three million. If that be compared with present times, the same property with no additions will sell for about twelve million. But the pace of growth between 2003-2007 and 2008-2010 makes for interesting observation. From 2008 to date, properties in sections deemed cosmopolitan have seen their value triple even quadruple in some others. Analysts associate this with rapid growth and improving economic times, while others blame this on the post-election violence that saw scores displaced in the Great Rift Valley for instance and depending on their economic standings, people migrated to the larger Nairobi area suppressing the ready supply of land and amenities.

By the sheer fact that some areas were seen as safe and cool from this monster of tribal conflict, properties in and surrounding the areas peaked in value. Consider Rongai in Nairobi or Syokimau-Katani area off Mombasa road. There was not an iota of election violence in that dark period of our history. What do you find there?

Another factor that has rent prices going up is supply of social amenities and public infrastructure. Property owners along Thika road and bypass areas are smiling broadly all the way to the bank given this godsend of government infrastructure spending that situated itself in their areas. Still, if sewage, electricity and roads are supplied to hitherto locked areas, there happens an influx of developers and buyers and these drives up land prices.

On the other hand, one might buy a piece of land in a remote outpost and if bold enough develop it. This has a compound effect of pulling more settlers hence pushing up property prices. A friend of mine had approached me in my formative years of employment. We had to go to Syokimau area and piggyback on a company that was selling its 50*100 shares for 160,000/= in October 2008. The name of the place sounded like a backwater village and I remained aloof only amenable to names like Karen, Runda, Lavington et cetera where my pocket could not even reach. There is nothing as worse as lack of knowledge.

In May 20010 the same plot went for a million shillings and I had to trek 9 kilometres deeper to afford an acre at 1.2 million. This is largely due to the fact that bold investors have put up in the area state-of-the-art properties and land supply has become scarce. Every time I take our investment club round to shop for land and they frown upon me saying this area is deserted or we cannot not afford the risk of a loan just to buy this soil, my insides become a bag of ashes seeing how men learn the hard way.

I always advise my friends to shy away from stocks and bury their money in land. You can buy say an acre and divide it up into plots of 50*100. That gives you eight plots. If you can wait a year and put it for sale you can make crazy equity if you chose well on location and bargained hard on buying price.

This is exactly what a contemporary of mine did six months ago. He took up 3 acres in Joska area just 10 kilometres from Ruai. My group had avoided taking a loan to top up on their savings to foot the selling price.  He approached a bank and qualified for 1.6 million which he used to pay for the land. He then approached a land surveyor who split the land into 50*100 plots resulting in a total of 24 plots. He speculated for six more months and put the same on sale. He built his small portfolio from an investment of 1.6 million to 6 million in a record twelve months.

I do not profess great knowledge in investment nor business, but I always whisper to my friends not to save their money in the bank. It is a little better than hiding your money under the mattress. Put your money in land if you choose well and as no one is making more of it, you will make a lot more equity than just sitting and waiting to have that great salary to buy a decent mortgage.

Whatever you do you have to avoid a few things here and there. Avoid all the time buying land through third parties or better still brokers. Brokers alone have to their credit inflating the price of land by several hundreds of thousands. Just a week ago, we bought a small property on Kangundo road and on meeting the real owner, he was gnashing his teeth how his three brokers sucked a whole 0.1 million in fees. On our side, that meant we subsidised their fees by the same amount.

Secondly, know your thing. Do not use someone to process and transfer the title on your behalf unless you are clear what is involved. The first property we bought we lost 100,000/= due to ignorance. The title search alone we paid 3,000/= something that cost only 250/= then. Title registration alone we were duped to believe and paid for 40,000/=. Ask around and pay only for what you understand. Do not pay for something taht is Greek to you.

Do your due diligence. Never pay for land that you have not researched whether is sits on a road reserve or whether it is grabbed land. ‘Had I known’ is too little too late. Some land sellers have mastered the art, they double cross and sell the same piece of land many times. In fact a search at Lands offices is not enough in these our times of woe. Know who the seller is and why they are selling the land now.

Another common mistake prospective land buyers commit is buying land whose bearer on the title deed is deceased without watertight controls. If one of the parents is deceased and the children are selling the property, ensure you know the contents of the will by demanding to see the letter of administration.

But this sounds exotic to most property owners in our communities where wills are not common. Please then enjoin any of the living parents with the sons or daughters (ignore gender at your own peril) selling the property and a good lawyer will then enclose a clause that compels ownership to you once succession is through.

I read last week that land in Kenya in the proverbial equivalent of gold as a store of value, always appreciating. Be it for settlement of speculation, position yourself well as government spending on public infrastructure grows and even more importantly, counties take effect when land demand is poised to shoot given local governments needs to build offices and manage land within their borders.

Position yourself well you might make that easy million if chance will meet your preparedness. Cobble up chamas or investment clubs or self whatever is your investment vehicle and hit the line hard as we say in football. The market is ripe if you consider that out of the required 150,000 thousand units of housing required in Kenya per annum, we are only able to supply 30,000. Add to this the fact that yearly, a million souls are added to the national population grid and you have a stable investment platform. As Mark Twain remarkably noted, buy land, they are not making more of it anywhere!

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