Real Estate Moment

Buy Buy Buy Many signs are pointing on the need to invest in property/real estate; from a mentor who says that land is the only commodity that is not increasing, to Dr. Laila Macharia, who in her TEDxNairobi talk said the boom is yet to come. NSE listed Centum Investments now has real estate projects on Uhuru highway and at Runda, and even a local reality show star (runner up in Tusker Project Fame) Nganga said in an interview, that if he had won, his Kshs 5 million ($62,500) would have been deployed into real estate.

Also, last week Hass Consult and CFC Bank released a report showing that real estate outperformed stock market in returns; I’m yet to find the report, but a post in 2006 shows that the debate of shares verbs property returns is not a new one.

Money flows in real estate? A lawyer who specialist in commercial law has found herself doing more real estate transactions – and is surprised by both how much money is being invested in land deals and how expensive Kenya is compared to south Africa – e.g. a 120 million Nairobi Muthaiga property, can be trumped by a better one or Kshs 50 million in Cape Town.

Is land over-valued? A notice board had these ads of land for sale last week – 10 acres in Isinya for Kshs 5 million, 2.3 acres in Karen for Kshs 14 million, 30 acres in lanet for Kshs 40 million, 100 acres in naivasha kedong at 60 million (600,000 or $7,500 per acre), 1005 acres in ruiru for 301 million (310,000 or $3,825 per acre), 1,295 acres in thika for Kshs 1.1 billion (i.e. Kshs 850,000 or $10,400 per acre) and 250 acres at 20 million per acre in ngong road.

The recent prices are subject to much debate Is it simple demand (for 500,000 homes a year) & supply (150,000 new houses built a year in Kenya)? Is it Somali money or foreign investors & donor agencies, or is Kenya an investment Mecca for the east Africa region?

Banks are tempting: Last weekend the annual homes expo was held at KICC and present were several bank exhibitors: For comparison, a Kshs 10 million ($125,000) mortgageloan can be obtained from Barclays (at 12% up to 20 years at 110,039 per month), co-op (at 13% up to 20 years at 117,157 per month), Equity (at 15% up to 10 years at 161,335 per month) Housing Finance (up to 20 years at 137,257 per month), and National Bank (up to 20 years, subject to retirement age of the borrower). Most give up to 90% finance, and advise borrowers to factor in 5 – 9% for closing costs.

Housing Finance wrapped up a mortgage bond offer that realized Kshs 7 billion ($88 million) against an initial target of 5 billion. The bank has been in turnaround mode, gone from cost/income ratio in 2005 of 73% to 58% in 2009 and non-performing from 35% to 4% over the same period, and has fended off interest from Equity Bank. The Bank’s MD also called for the Capital Markets Authority to green light real estates investments trusts (REIT’s) as the bank also became the latest corporate to join the world of twitter (@housing_finance).

But few are biting: How many mortgages in Kenya? A central Bank of Kenya source says there are only 14,951 mortgages, in a country of 38 million people. (0.04%) with a total value of about Kshs 60 billion, for an average mortgage of Kshs 4 million ($50,000) Samuel kantai – so banks are not the source of real estate developments.

Any other thoughts on real estate?

12 thoughts on “Real Estate Moment

  1. Buniyad

    Buniyad is an ISO standard certified company which imparts services related to the sale purchase of properties, documentation, renting and leasing, investment advisory services, property valuation etc.

  2. Ahmed Said

    In the Kaaga/KEMU area 10+km north of Meru town an acre of land is going for Sh6m (and that if when you can find one). Makes me wonder if we are in a bubble. This pouring of vast sums of cash – not credit – into real estate comes at a cost to which other industries ?

  3. kenyanreality

    Hi Bankelele,

    I got introduced to your blog (march 2005) by googling “mortgages in Kenya”. I am among the few biting. I have a mortgage (3 years) and I am about to get a second one.

    Is land over valued? Yes, and the result is so are houses. I have no research data to predict a boom or bust cycle but so far the return has been acceptable to me and I am looking to invest more in this real estate market.

  4. bankelele

    apartements a louer a yaounde: thanks for the info, i really want to visit west africa and do a comparison of markets.

    kenyanreality: thanks, good to hear you’re doing well in real estate,a and started recently. My hesitance, is usualy because of the feeling that i’m getting into real estate too late in the game, but then insiders still say the best is yet to come… also for research, see the quarterly reports on price changes

  5. Maureen

    Thanks Banks,

    This is great info. The Money Academy say they’re also putting together one-stop shop info platform that will give comparison across different mortgage providers.

    Something else I’m keen to find out is what mortgage options are available to consultants (like myself) and other self-employed people that don’t have open-ended employment contracts and a fixed figure, predictable income.

  6. bankelele

    Maureen: Thanks – there’s a homes expo next week at KICC and there should be a chance to ask some questions about mortgages for self employed & consultants. There are personal & cooperative loans, but which are smaller than mortgages.

  7. thegoldguy


    Thanks for your invaluable information on mortgages and finance in Kenya. I have vast experience in the US market, and have been studying the Kenyan market for the past year. Things are looking up in some sectors, while we have unique bubbles in others.
    My company has just been registered and I will be offering mortgage advice and consultancy to individuals and investors starting from May of this year. We have already identified different niches in the market, especially for self-employed and unique borrowers. Otherwise more on this later. Thanks again.

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