Overview of the real estate in Kenya
Real estate in Kenya is one of the most resilient and profitable economic sectors of the Kenyan economy. Since 2000, the Kenyan real estate has recorded exponential growth and has gone on to become one of the major contributors of Kenya’s GDP.
The growth of the sector is attributable to infrastructural developments, demographic trends, and stable GDP growth.
Is real estate a good investment in Kenya?
Real estate is a good investment in Kenya and one of the best ways to make money in Kenya. The sector compares greatly against traditional asset classes such as equities and bonds.
Specifically, real estate has recorded 25.0% total returns against 12.4% returns of traditional asset classes. This makes real estate one of the more favorable asset classes to invest in the country.
Other than the high returns, real estate offers individual investors a myriad of opportunities to invest in depending on their taste and preferences. One can invest in commercial real estate which comprises of office space, retail space, and industrial space.
Residential and hospitality are other notable categories that individuals can invest in. Also, buying land is another category that is rising in popularity as Kenya continues to modernize its infrastructure. All these options make real estate one of the more viable investment classes in the country.
How to invest in real estate in Kenya
One can invest in Kenyan real estate using accredited real estate agencies. Vaal Kenya is one of the premier accredited real estate agencies in the country.
As a real estate agency, Vaal offers its clients all the aforementioned real estate categories. The company offers its clients the ability to purchases property and also lease property across all categories. Being an accredited real estate agency, Vaal also ensures that its clients have all the legal documentation and provisions for both tenants and landlords.
This is in accordance to the strong property rights in Kenya that seek to protect property owners in the country.
How profitable is real estate in Kenya?
As an emerging market, Kenya’s real estate is slowly becoming one of the most profitable investments in sub-Saharan Africa. This is mostly due to the fact that the government’s current focus on improving infrastructure in the form of roads and utility connections. Such developments are in anticipation of increased demand for urbanization and the country’s aim to attract foreign investment. Real estate will be the greatest beneficiary of these developments and this will greatly increase profitability of the sector as demand increases over time.
Historical data also points out that the real estate sector is more profitable than traditional asset classes. Over the past 6 years, the sector has recorded a 6.4% compound annual growth rate. This growth would have continued were it not for the COVID-19 pandemic but the sector has persevered and is projected to continue growing at a similar trajectory. Increased infrastructure spending by the government will spur the growth of the Kenyan real estate sector.
Another valuable metric of assessing the profitability of Kenyan real estate is the country’s stable political and economic environment. Kenya is a democratic country that has liberalized economy similar to that of Western countries. This makes political risks such as expropriation minimal and makes the country the most suitable for foreign investment in East and Central Africa. A stable economy makes real estate one of the most viable ways for investors to invest into the Kenyan economy. For this reason, the Kenyan real estate market is a mixture of both domestic and foreign investment which translates to a ready market with a multitude of buyers and sellers.
What should I invest in Kenya?
Real estate offers investors a multitude of avenues to invest. Some of the most notable ones include: buying apartments and commercial space, leasing commercial space, buying land, and investing in Real Estate Investment Trusts (REITs).
Buying apartments and commercial space is for investors who have a long investment horizon of more than 5 years.
Real estate agencies such as Vaal develop residential and commercial properties for investors. The residential properties are priced depending on their location and the amenities provided.
This is also the case for commercial properties. In purchasing these forms of real estate, the investor will mostly benefit from capital appreciation with the apartment increasing in market value over time. As one of the premier real estate developers in Kenya, Vaal’s properties are in prime locations whose demand will increase over time as the country modernizes. This is also the case with commercial properties.
For investors with shorter investment horizon, leasing and renting properties is their gateway to the Kenyan real estate market. Leasing and renting provide investors with the ability to generate rental income.
Kenya is primarily a rental market with majority of the middle class opting to rent rather than own housing. This is due to affordability. Rental income is expected to one of the ways for generate returns over time as the Kenyan middle class continues to expand. Purchasing properties to further rent or lease them provides investors with the double opportunity of benefiting from long-term capital appreciation and short-term rental income.
Thirdly, purchasing land is another avenue to invest in the Kenyan real estate. Unlike residential and commercial properties, land is undeveloped and offers the opportunities for capital appreciation in the long-term.
As Kenya continues to urbanize, the value of land is increasing at an exponential rate and this presents an opportunity for investors.
The capital appreciation of land is straightforward given its primacy in real estate and this is not expected to change in the foreseeable future. Investors who prefer undeveloped land are likely to generate considerable profits as they can either outrightly sell the land to developers or simply develop the land for their own housing project.
Lastly, investors can also use REITs to invest in Kenyan real estate. REITs are an investment vehicle that pools finances from investors to finance the development or acquisition of real estate assets.
The investors in REITs receive returns from the income generated from the assets managed by the REIT. REITs enable investors to diversify their real estate holdings as the management of REITs focuses primarily on all real estate assets.
This enables investors to benefit from competitive long-term returns and liquidity as they can increase their shareholdings in the REITs or exit from their shareholding as they wish. The benefits of REITs are numerous and investors in the Kenyan real estate should consider them as an avenue to enter into the Kenyan real estate market.
Read also: Buying into off plan property in Kenya
How do I become a real estate investor with little money?
Becoming a real estate investor with limited finances is easier than one might imagine. One can invest in REITs as they are listed on the Nairobi Stock Exchange and buy shares in them.
REITs are specifically created to protect shareholders as they are mandated by law to pay shareholders dividends from at least 80% of their income. This provides investors with limited finances to benefit from stable and consistent income stream.
Other avenues for investors with limited finances include property value appreciation from smaller apartments.
The Kenyan real estate has apartments ranging from studios to 4 bedrooms and beyond. The studio apartments are within the price range of a significant portion of the Kenyan middle class. Purchasing a studio apartment and renting it out would provide an investor with rental income in the short-term while also enabling him to benefit from property value appreciation if they decide to sell the unit later on. This is also the case for other similar units.
What is the fastest way to make money in real estate?
Purchasing apartments and renting them is one of the fastest ways to make money in the Kenyan real estate space.
As the Kenyan middle class expands, rental properties are increasing in demand. Despite being expensive to own, rental properties in Kenyan cities have adequate amenities and have proximity to their offices.
This means that rental properties in Kenya are evergreen in terms of demand. Thus, rental properties are one of the fastest ways to make money.