145 acres at Maili Tisa for sale

145 of freehold land is available for sale at Maili Tisa which is 2km from Namanga. The price is Ksh100,000 per acre. The owner doesn't want to subdivide but he is willing to sell to a group who can then subdivide among themselves. I am therefore looking for individuals who like me, are looking to get very good land at prices that is increasingly unheard of in Kenya.

You can use the land for dairy farming; wheat farming; tourist cottages or for speculative purposes as land become scarcer resource in demand.

Please email if you are interested ideally stating how many acres you are interested in.

mainatathotmaildotcom

Kenya real estate: do we have a bubble?

A bubble is created when you have air in a liquid. Likewise a real estate bubble is created when prices are full of air. In simple terms, real income can't afford prices. A real estate bubble will always be driven by too much cash and not enough investing avenues.

Real estate in Kenya is class based. That is to say they are areas such as Muthaiga, maybe Karen, Runda, Kitsuru which are reserved for the upper class; NGOs; pirates; and other criminals and money launderers. These areas operate very tight demand and supply markets that keep prices not only from falling but rarely falling bar a catstrophe such as PEV. These are found in almost every large city. A bubble is rare here.

The settled middle class areas are Kileleshwa, Kilimani and many others. This market is aspirational, and in essence that is the issue. When you hear a 3bed apartment going for Ksh17m, ask yourself how many well paid Kenyans can afford a mortgage on that at around 14% interest rate. Answer, its Ksh200k per month assuming Ksh5m deposit on the apartment. This implies monthly income of Ksh500k before tax. Ho many Kenyans are on that kind of salary? Hence a bubble almost certainly exists in this market. The bigger worry is which banks are giving mortgages into this sector.

The lower middle class areas are increasingly get drawn into the squeeze with concomitantly higher rents...

to be continued...

How greenbelt zoning can save Kenya's arable land

The future of Nairobi conurbation looks like that map that Mutula Kilonzo tried to pull off but didn't manage. Everybody is in a hurry to extend Nai's reach to Thika, Kiambu, Machakos and Kajiado.

In the process, some of Kenya's most food productive land not to mention aesthetically please landscapes will disappear for good. The whiners will no doubt be wheeled to talk about GoK not responding quickly enough to flooding, droughts et al. The time to act is now before our food insecurity becomes acute driven by lack of enough arable land.

A greenbelt zoning does what it says on the tin. It puts a belt around designated green areas so as to protect them from planned (or in our case unplanned) buildings. In my humble opinion, Kiambu is a rich agriculture district that should be designated a green belt zone so that crop production can continue in the area. On the other hand, places like Karen should be opened up for further building.

Kenya Real Estate for beginners - Plots/Land

It’s never too early to buy a plot for your own future home or for investment purposes.

Do your due diligence

1. Check in your proposed location of purchase for amenities that you require

a. Electricity

b. Water

c. Nearness to tarmac road/main road or river if for farming

d. Any proposed developments

e. Any past or present issues with land ownership such as reserves, demolitions, forest land

f. talk to neighbours understand if any issues over land

g. confirm pricing either via Nation’s Thursday property guide or visiting nearby shopping centre

h. above all, visit the plot/land you intend to buy wherever possible.

2. Paperwork

Get the owner to show you the title deed. Note the title deed number and the size of plot/land. Note that 1 hectare 2.47 acres. ¼ acre is therefore 0.24 hectares. Note that some surveyors can and do understate acreage

Take a photocopy of the title deed and take the same to the local district land registry where you will pay Ksh500 for a search. The search is a land registry document that confirms if there are any caveats from bank, other buyers or relatives.

There are occasions when owner may legitimately not have a title deed. The only legitimate reason is inherited plot/land. Certificates are tricky because there is a trade off between legit certificates that can easily be converted to title deeds and certificates of ownership that are in perpetuity

It favours you often to have a sale agreement that has the legal back up. If you are buying plot/land worth Ksh1m plus, the lawyer costs can to around 30-40k. I think it is worth it.

You will need original and copies of your ID, KRA PIN (which you can no longer obtain without an ID). You will also need 4 passport photos from buyer and seller.

Don’t bribe to get paperwork processed faster. For example special land boards will usually come back to bite you. Most land offices have the terms of service prominently displayed on the counter and its worth reminding them.

vii. Copy of owner's title deed->search->sale agreement->transfer->land board consent->stamp duty->your title deed

Pricing: Kenyans today know the worth of their land. No seller will overprice you if you make them a reasonable offer. Cash is king and if you have it, it opens doors to very reasonable price offers. As an example, most people nowadays do 10% deposit and remainder in 3 months. If you go to the seller 10% now and remainder in a month provided they drop price, it leads to a different outcome. It’s also possible to go to the same seller and offer 50% now and remainder in 6 months and they’ll favour you because of the cashflow aspect of a deal. Pointing aspects that please you and those that don’t while pointing out favourable payment terms will get the price down too.

Related costs: Stamp duty on plot/land is 2% in rural areas and 4% in urban areas. That is % of buying price or Lands’ valuation whichever is higher. Where land requires surveyor beacons, you need to add another Ksh10k though you should get the seller to these on. The costs of changing the documents tend to be around 3-4k. If you get a sale agreement, you’ll find most sellers don’t really care either way and you bear the cost 100%. All in all, these related costs will be between 3-6%.

Caveats: There is caveat emptor. You also place a caveat with Land registry if you are putting down a deposit and paying remainder much later or you fear somebody may attempt to sell your plot/land especially if you are in diaspora.

Intro: Mortgages in Kenya

A mortgage is a loan taken out to buy a house with the house acting as the collateral. This bears repeating. A mortgage is loan just like any other.

Basics:

For the borrowers

Things to consider are;

1. Can you afford a mortgage? A mortgage will rarely ever be less than your monthly rental. By itself. Once you add council rates, utility bills, furnishing, maintainance bills (these will be there whether the boma is new or old), you'll see your monthly costs go up by a third of your rent. So you must look at the likely monthly repayments. Your mortgage repayments will depend on...
2. Price of property: Prices have rocketed in Kenya though the upmarket areas are now seeing a much needed cooling off. I think the key driver was the cash-only buyers primarily remittances and these are already falling off. However, the lower end of the market has sufficient demand to see it continue growing but I doubt we'll ever see the frentic pace in the upmarket areas. Websites that will get you a feel for prices are many but a few are villacare; estates.co.ke; hassconsult; nyumbanet and uzanunua. Many think that there is a bubble in the market and this may well restrict your resell price should there be a marked corection.
3. Your deposit: The higher the deposit you put down, the lower the loan you need to borrow. And of course the lower the amount you want to borrow, the more interest rate options you get. The key criteria is always, are you better off reducing your monthly mortgage repayments compared to earning a return in some other form of investment. Put another way, can you invest the deposit in another venture that gives you more than say the 15% interest rate that you will save by oputting the deposit down? However, its rare in Kenya to get 100% mortgages so some deposit will be required.
4. Interest rates: There are two things you need to know about interest rates generally, the current rate and the future expectations of where interest rates will go. There are two types of interest rate deals that are currently offered in Kenya. Current interest rates are set depending on amount you want to borrow and duration (term) you want to borrow for. Variable interest which basically means that it moves as general interest rates. So future expectations become of added importance. And initially fixed interest rates. I have put together a little table that I'll update from time to time.
5. Monthly repayments: From the above, you should now have the bits that will help you decide what type of house you'll buy based on its monthly/annual cost. You just need to plug the numbers into this Excel equation... = PMT(interest rate/12,term*12,property price less your deposit). Alternatively, go here and input the same numbers to get your monthly payment.
6. Location: This is a feature unique to Kenya where some banks only offer mortgages in specified towns. Reason is obvious.

For the lenders:

Important factors. With mortgages, its as important for the borrower to know what the bank will look for before lending.

1. Income expenditure gap: Most lenders want to know that should they have to or decide to jack up interest rates, there is enough of a gap in your income-expnditure to allow for this. So for example CBA won't allow repauyments that sccount for more than 50% of your monnthly income.
2. Loan to value ratio: aka LTV. Should be no greater than 80% or anticipated price correction at time of appplication.
3. Income mulitples: Simply put this is the ratio of your annual gross salary to mortgage amount required. Prudence dictates that this shouldn't be more than 4 times.
4. Screening reqquirements: Many banks tend to have more onerous requirements when they want to reduce lending and vice versa when they want to increase it.
5. Other mortgage set up costs: These are noticeably higher in Kenya and include stamp duty, legal, processing fees et al.

Final point.

• Take a mortgage to suit your stage in life. If you are young or have a young family, you'll surely be making a move to another house at sometime in your life. Therefore, consider a mortgage as you'd any other investment. Without getting emotional.
• Late edit: If you are in the diaspora, avoid if you can, taking a mortgage in Kenya and if you already have one, exchange it. The difference in interest rates is just too big especially now. Instead, borrow from a local bank at a lower interest rate and buy the property or pay off your Kenyan loan. Kama ni makaratasi, find somebody who can do this in exchange for your title deed and an agreement.

BTW: the word mortgage is of French origin and literally means dead pledge.

UK/US Housing Market & Impact on Kenya's Real Estate

Economic growth in most if not all western economies is fuelled by consumer spending. Consumer spending is in turn fuelled by cash (or more specifically, credit). That is stating the obvious. What doesn't seem obvious to many is that most secured personal and even business loans tend to be secured against properties.

Since the credit crunch started lenders have pulled back credit lines. This means that among other things, first time-buyers can't find affordable mortgages at current house price. Neither can buy-to-let buyers. These two sectors have fuelled growth in house prices over the last decade. This means that sellers have to cut house prices. They in turn have lower deposits for their next homes, cue more price cuts until we get to negative equity. At negative equity,every mortgage borrower has to find additional capital to get a mortgage. Then? Both first-time buyers and those moving homes have to save more. Which means less spending.

This also has implications for Kenya Estate for Diaspora funds that find their way home into real estate. Real estate in Kenya has since 2002 been funded by 3 sources;

1. Diaspora or NRKs (non-resident Kenyans)
2. cheaper and accessible loans
3. and savings in that order. And possiblly NGOs and foreign real estate funds (funded via savings and real estate equity)...

Most diaspora funds used in the real estate in Kenya have been funded from borrowings on housing equity held in their UK/US homes. With most of that equity disappearing (most houses bought since 2005 might be in negative territory by mid 2009), NRKs may find themselves having to not only look for additional funds if they want to invest in Kenya, but also diverting normal savings to cover this negative equity. 2ndly, affordability for resident Kenyans will become an issue.

The only type of real estate that will continue appreciating will be plots...

KQ, minted stockbrockers, REITS

It doesn't rain, it pours is apparently KQ's new mission statement. OK, things have been tough because of the political quagmire, lakini, its managed to lose practically its top management with no CFO; HR director(i hear there was a change); commercial director; no flights manager; no technical director. Do they all know something that we don't? Now even Paris flights are a
are likely losing it money. I have posted before on its pre-crisis issues. I passionately believe in KQ, but we now need a change of leadership, because that is where
the buck stops. Let it get someone who can steer it through the next year operationally so it'll be ready as the economy takes off.
For every Francis Thuo and Nyaga stockbrokers, there is a D&B and CFC, two brokers that though not on the straight and narrow take home some serious revenue from buying and selling yours and my shares. Stockbroking should be the one business in Kenya that should bankable year on year if you don't do anything stupid. Truly, IF is a big word.
It’s pleasantly surprising to see that Rutleys still plans to go ahead with its property fund and may even list as a REIT
if and when CMA wakes up from its slumber and decides to allow them. Bora Capital another property fund venture has gone quite despite interest from
many including in the Diaspora.

Is Kenya in the midst of an asset bubble?

An asset bubble is defined as a price level at which an asset's value is completely unrelated to its real value e.g. the price of a house being 4/5 times cost of building the house or a forward PE ratio of 40 times the company's profitability in the case of shares. An asset bubble can also be ascertained by comparing the price trend in a particular location with similar sized locations in other countries (in the case of house prices) and comparing company PEs where they are in the same sector. This article reviews the Kenyan experience of an asset bubble in its real estate and the stock market.

In real estate, although there is no data that is currently centrally corrected on movement in house prices (one is being planned), anecdotally, it can be shown that the house prices in all the areas lying between Garden Estate and South B have in the last four years increased four-fold (evidence of 50% growth in last 2 years here http://www.propertykenya.com/articles/kenya_real_estate_boom.phpm and here http://www.globalpropertyguide.com/country.php?id=100&cid=af&cat=5). 1/2/ acre plot that would have cost an average of ksh750k in 2003, now starts at ksh2.5m; the equivalent in the above places cost ksh1m in 2003 and now costs ksh4.5m plus. For a family home, these would have cost ksh3-10m but now range from ksh10m-40m+. In fact, all major towns in Kenya are now experiencing a housing boom driven by the increase in money supply; a more buoyant economic environment; huge increase in diaspora remittances and a move away from the big cities of Nairobi and Mombasa. However, the asset bubble in these areas of Nairobi has additionally been driven by some unique factors.

• Increased presence of NGOs with “phat” housing allowances for their staff thus a ready-made rental market increased population from the rural-urban migration and expatriates.
• Asymmetrical information i.e. there are very few real estate players who have a real idea of the comparative house prices in the areas they buy/sell. This has led to situations where sellers can call a price and be able offload their properties at those prices.

The evidence in the stock market is more mixed. The NSE index grew by 378% between Dec 2002 to June 2007. However, the drivers for this were in most cases supported by the underlying earnings growth of the shares. The additional factors such as more investors (domestic and diaspora) flowing into this market and more optimism about the direction of the economy are likely to remain in place. Inflation has grown by 50% in the economy as and will thus have had a bearing on company profits. Several counters are exhibiting bubble-like qualities even after the correction earlier this year, but are driven by speculative events specific to them. The evidence of a bubble in the stock market is patchy at best.

While there is something in the region of 500,000 stock market investors, those involved in the real estate are a much larger group. Thus the current real estate bubble is of concern because:

• It shows a dearth of similarly lucrative investment opportunities in other economic sectors.
• To the extent that asset inflation can have impacts on economic activity (those holding appreciating assets will use some of the equity to buy consumables or invest elsewhere), any bursting of this bubble would lead to negative multiplier impacts) will distort economic growth by focusing resources on sectors with low multiplier effects.

Options to slow down the bubble:

Monetary policy-one of the main drivers of current bubble was the reduction of banks' cash reserve to 6% from 10% and consequent reduction in yields from t-bills which meant that banks now had to go out and lend (BDA put growth in mortgage lending at ksh3bn in 2002 to ksh35bn in 2006). As such a tightening of this or other measures that would impact liquidity such as the proposed increase in capital requirements will reduce it

Fiscal-introduction of capital gains tax was muted last year by Kimunya who is clearly concerned about house prices.

Administrative: Planning permissions (as was done last year to allow utilities to catch up) and enforcing these rigorously would have the effect of spreading price growth to the whole city as opposed to particular areas of the city

Increased supply-will take time but is already having an effect in areas such as Kilimani and Kileleshwa.

Information: having an index that tracks prices and or a property price map would also allow real estate investors to make informed choices that would for example shift the burden from already densely built areas to other areas that require more housing. In NBI, making a economic case for building nicer houses in the slum areas would be a good result.