Buying property in Kenya: Understand the Transaction costs
The Total transaction costs involved when buying property in Kenya are relatively low compared to other countries. This article lays bare the transaction costs involved and answers pertinent questions. How high are realtors’ and lawyers’ fees in Kenya? What about other property purchase costs?
|Stamp Duty for Draft Transfer||2% – 4%||buyer|
|Banker’s Check Charge||KES600 (US$7)||buyer|
|Real Estate Agent’s Fee||5%||seller|
|Costs paid by buyer||3.51% – 5.51%|
|Costs paid by seller||5%|
|ROUNDTRIP TRANSACTION COSTS||8.51% – 13.76%|
How difficult is the process of buying property process in Kenya?
Foreigners can buy ‘commercial class’ land in Kenya. This type of land is for income or revenue-making purposes. Foreigners are allowed to acquire this and build on it.
‘Agricultural land’ or farm lands cannot be acquired by foreign individuals. ‘Agricultural land’ is usually owned by indigenous people. If the purchase is made through a company – the majority of which must be Kenyan-owned – then it is allowed. The land will be bought under the company’s name.
There are freehold and leasehold types of land. Mostly, land in Kenya is government-owned. This can be leased for 50 to 99 years.
The first step to purchasing property in Kenya is to hire a real estate lawyer. A title search on the property is very important as many areas are not registered. Once the property has been chosen and a price is agreed upon, the lawyer prepares a sale agreement as a conditional preliminary contract, signed by both parties. Upon execution, the buyer pays a deposit of 10% to 30% of the purchase price, which is usually refundable if the seller defaults on the transaction.
Closing the Deal and stamp duty payment
Closing is usually within 90 days from signing. During this time, the seller must obtain a clearance certificate from the municipality. This is presented to the buyer to ensure that all local taxes and utility bills have been settled. The lawyer then files a Draft Transfer at the Lands Office and the stamp duty is paid. An official from the Ministry of Lands will come to inspect the property, verify its condition, and make sure that the sale price is in accordance with its actual value. These steps will take approximately two to four weeks to complete.
The lawyer submits the documents to the Lands Office to be able to register the transfer, including the original title held by the seller, clearance certificates, consent transfer and the form for valuation for stamp duty. At the same time, the buyer settles the remaining balance with the vendor. Taxes and lawyer fees are paid within 30 days from closing.
Buying property in Kenya when you are outside the country is possible. One can assign a lawyer to go through the whole process on the buyer’s behalf through a power of attorney.
The whole process for the titling of the property can typically be completed in around 72 days.
Footnotes to transaction costs table
The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.