Have you been looking for a solid investment back home? An investment vehicle that grows your wealth while offering substantial returns, liquidity, and long-term passive income? The Kenyan Real Estate Space has your answer.
Remittances alongside other investments from the Kenyans in Diaspora are critical for Kenya’s economic development. Real estate is among the most preferred investments for the Kenyans in Diaspora, which comes with value for money. It is estimated that five million Kenyans live and work abroad, and despite being miles away, having different time zones, and having cultural differences, this community maintains a strong level of connection to their homeland. It’s not surprising that real estate stands out as their top investment choice. With rapid urbanization, infrastructure expansion, and growth of the middle-class population, the country has been exposed to lucrative opportunities in the real estate market, be they short-term or long-term. Today, let us explore how Kenyans in the diaspora can invest in real estate, the available options, challenges, and strategies to make informed and secure real estate acquisitions in Kenya.
Looking at affordability, experts in the industry quote an investment amount as low as Ksh. 5 million ($39,000) as being enough to kickstart your investment journey in Kenya’s prime locations. Here are the various real estate options to be considered.
- Residential Rental Properties.
- Commercial Real Estate.
- Real Estate Investment Trusts (REITs).
- Real Estate Investment Groups/ Investment clubs/ Partnerships.
- Fix and Flip investment.
- Vacation Homes.
- Student Hostels.
- Affordable Housing Initiatives.
- Agricultural Land.
Challenges Faced by Diaspora Investors in the Kenyan Real Estate Market
The Kenyan real estate market has yet to attract the majority of diaspora investors mainly because of the unfamiliarity with the local market trends and the perceived risks associated with remote transactions. Some of the biggest challenges include.
- Finding the Right Property: Investing in a property from afar can be difficult, especially when considering properties that align with investment goals, comply with zoning rules, and have the potential to grow.
- Friends or relatives undertaking property identification may not always give the best options; exploitation or disappointment may occur at times.
- Investing in rental income could pose challenges in identifying the right properties to attract reliable tenants while offering good rental yield without knowing or having local contacts.
- Validation of Property Ownership: Verifying property ownership and authenticating the title deeds help to forestall fraudulent transactions. However, searching the land registry record often requires a manual process that is cumbersome and time-consuming for those abroad.
- Inability to Negotiate for Good Prices: It is required to have sound knowledge of the market, an understanding of prevailing rates, and the ability to identify a property’s worth on its own. These advantages may be absent in the case of diaspora investors, which can cause prices to inflate or opportunities to be missed. Using a local skilled negotiator is important to get the best possible deal.
- Legal Complexities: You can also face challenges relating to understanding Kenyan property laws, regulations, and procedures if you are not fully conversant with the local legal framework. They tackle land ownership rights, property registration, and contractual obligations. This calls for help from Kenyan property law experts.
- Property Management from Afar: Managing properties from a distance is difficult; it involves rent collection, property maintenance, tenant relations, and many other facets of property management, which may require the help of trusted local partners to structure a reliable property management agreement.
- Mismanagement and fraud: There is a risk of putting your investments in the hands of unverified agents and developers who might steal funds or mismanage the property. Consequently, the Diaspora investors should intensively vet potential partners and work with established and credible agencies.
- Currency Fluctuations: Volatility in exchange rates can significantly affect affordability and return on investment.
- Limited Information: Without information, it is difficult to track down market trends, investment opportunities, government policies, and legal matters related to the Kenyan real estate market.
Strategies for Overcoming Investment Challenges.
Diaspora investors can deploy the following strategies to navigate and overcome the complexities of the Kenyan real estate market.
- Partnership with Reputable Local Agencies: Work with established real estate agencies, property managers, and legal professionals in your locality to access their expertise and trusted network. They can help with property identification, due diligence, legal compliance, and property management. At Austin, realtors can help you with professional guidance and connect you with the relevant credited institutions.
- Utilize Digital platforms for Remote Management: Take advantage of online rent collection platforms, virtual property tours, and communication tools for effective property management. In Kenya, property management software like Yardi, Buildium, Propertyware, MRI Software, and AppFolio provide platforms for online rent payments, maintenance requests, and tenant portal functionalities, increasing productivity and customer satisfaction.
- Due Diligence: Perform thorough checks with the help of approved professionals to ensure the property is legally sound, free from encumbrances, and appropriately priced.
- Seek Legal Advice: The Kenyan property law domain is delicate; arguably, it is important to consult experts in Kenyan property law to ensure legal compliance and protect investment interests. Professionals provide guidance on property rights, contractual obligations, and dispute resolution – protecting diaspora investors from potential legal problems.
- Stay Informed: Be updated with market trends, government policies, and investment opportunities by checking trusted sources and online platforms.
- Consider Fixed Exchange Rate Contracts: Using fixed exchange rate contracts to transfer funds can mitigate currency fluctuation risks. These contracts promise to fix the exchange rate for a specified time, ensuring certainty and thus protecting from potential losses due to currency volatility.
- Diversify Your Investments: Apply across various investments, including rental properties, commercial buildings, and Real Estate Investment Trusts (REITs), to spread risk and earn more. Diversification leads to a balanced portfolio and reduces the sensitivity to sharp fluctuations in real estate in certain market segments.
- Familiarize yourself with the ‘Buy-to-Build’ Process: Certain developers in Kenya execute the ‘buy-to-build’ order where payments occur at various construction milestones. This ensures transparency and lowers the risk for diaspora investors, as funds are only released as construction progresses.
- Look for guarantees: Consider agencies that offer guarantees, such as a 100% guarantee of title deed delivery in 60 days. In this case, the realtor guarantees delivery of the title deed within 60 days, or your money-back guarantee. These guarantees can serve as added security and show the agency’s commitment to clients’ satisfaction.
- Explore Low Supervision Investment Options: Prioritize investments that require less supervision, like rental, commercial, or undeveloped land. These options enable diaspora investors to reap the fruits of their rental income or land appreciation investment without frequent involvement.
Conclusion
Investing in real estate presents a wealth of opportunities for Kenyans in the diaspora, offering financial returns, emotional satisfaction, and a chance to contribute to the country’s economy. Regardless of whether you go down with traditional real estate investment approaches or the modified modern ones, you must settle for the one that suits your financial goals, capacity, and strategy. Generally, you should always conduct thorough due diligence and seek professional advice when investing. We are always available to help and guide on investments via our emails, calls, or social media platforms.
