Buying and Selling Property in Kenya: a few simple guidelines to help you on your way
Buying and selling property in Kenya or in any other market is not for the weak hearted. In this guide with provide useful, simple and do-able guidelines to help in the process.
1. Why Buy?
A property, particularly in Kenya, offers an extremely fast growing return on your investment. In recent years, property values have doubled approximately every 3 years, and while the trend may be slowing down a little, there is absolutely no sign of the market values going down, or indeed the market collapsing.
2. Hiring an Agent
From a sellers perspective:
When buying and selling property an Estate Agent will charge a commission of between 2.5 to 10% (2.5% for high-value property and 10% for low-value property below 1m)of the total sale value of your property. For this, an agent will take away the stress and emotional involvement of selling, by advising you on everything from the value of the property and how to make it look more marketable, to dealing with any problems that may arise. If you are the seller, an agent will organize & conduct viewings and eliminate time-wasters, recommend lawyers and follow up on the sale, and speed up the whole process by bringing you more clients than you would find by yourself. An agent is also a valuable help in the negotiation process and thus will help you get the best possible price for your property.
We at Damka Properties will offer you a free estimate of the market value before buying and selling property – and we charge less commission than most!
Going through an Agent – from a purchaser’s perspective:
This will cost you nothing, so a no-brainer really! Apart from knowing what is for sale in the area and within the budget of your choice, an Agent will advise you on the purchasing process, validate prices, answer questions, even write the letter of offer for you. An Agent will also negotiate on your behalf, and follow up on the completion process once a sale agreement is signed.
3. How do I finance my property purchase?
As much as we’d all love to be briefcase purchasers, the reality for most is the need of financing. The original mortgage provider in Kenya is the HFCK (Housing Finance Corporation of Kenya), but these days there are other options from Building Societies to mortgages through private banks. Rates and terms vary and frequently change; we are happy to advise on a case specific basis.
4. Bridging finance
If you are in the process of selling your property in order to either upgrade to a larger / more expensive one or even downscale but need cash to buy quickly, we can help! Damka Properties has entered into a partnership with a number of private banks for bridging capital purposes.
5. What are the payment terms?
A rule of thumb is that you put down 10% at the time of signing the sale agreement. The completion process varies between 30 – 120 days, the average time is 90 days. The balance is due on completion of the transaction and registration of the title at the Lands Office. Payment is usually by Banker’s Cheque or a Telegraphic Transfer.
6. What other costs are involved?
The purchaser is liable for the stamp duty on the property purchased. This is currently 4% of the purchase value. The purchaser is also liable for their own lawyers’ fees, which are on average approximately 1,5% of the purchase value. You may incur loan management fees; these vary depending on the size & price of the property, the type of loan, and the loan amount.
Don’t forget that as a seller you are liable for your lawyers’ fees as well as the Estate Agent’s commission.
If the seller and the purchaser agree to use the same lawyer, the legal fees are reduced. Some, however, feel that this is a conflict of interests.
7. Can I buy if I am not a Kenya citizen or a Kenya resident?
The short answer is yes! But, you cannot own Freehold property (see point 8). It is also prudent to use the services of a reputable Agent and a reputable Lawyer to ensure that the process is smooth and “kosher” and to make sure that the property is transferred to your name.
8. What is “Freehold” and what is “Leasehold”?
A Freehold property means it is yours to “hold”, i.e. own, forever. These days only Kenyan citizens are allowed to own Freehold land. If a non-Kenyan buys a Freehold property, it will automatically revert to a 99-year Leasehold granted by the Kenyan government.
If buying a property which is already on leasehold, it is important to check how many years remain on the lease, as while extensions of a leasehold are generally granted, this may change and if there are less than 50 years left on the lease, this may influence your purchasing decision. Some mortgage companies also require a certain number of years left on a lease in order to grant a mortgage.
There are cases where people transfer a property into a company with a Kenyan director in order to keep a Freehold title. This is possible but requires a fairly complicated process of setting up a company with share holdings etc. – another story altogether!
Come and see us to discuss buying and selling property requirements – we are here to here to help!