INVESTING IN LAND

Kenya is currently experiencing a surge in demand for property. Real estate, in Kenya, has over the years proven to be a worthy investment due to its high returns. Property value has been noted to appreciate in very short periods especially in urban set ups and developing towns ever since devolution took off.

Areas that were once previously considered marginalised and remote, are now accessible, budding and experience increase in occupancy. County governments have greatly contributed to this trend owing to allocation of resources to such areas and wooing investors to places that were rather not active.

Ways to invest in land:

One way to multiply income from land ownership and land sales is to be buy a big chunk of land, subdivide it into smaller, affordable plots and sell them off. The portions could be 100ft by 50ft or 100ft by 100ft as theses are the common sizes that are on demand.  Many small players have made good profits from this model, in the process making it easy for the middle class and lower class to afford and own property in Kenya.

But like any other investment, land investment has its fair share of risks. Due diligence must be carried out to avoid investors and eventual potential owners losing hard earned savings. It is important to note that land purchase is a complex decision that should carefully be executed.

There are quite a number of advantages and disadvantages to investing in land. Several factors come to play when planning to venture into this lucrative industry.

Here are some of the factors to consider before purchasing land:

1. Advisably you should carry out a survey, talk to neighbours to find out who owns what or why a particular property is vacant. Soil samples can also be taken for further tests, to ascertain the type of terrain. You are also required to check with the lands office if the rates have been paid and that the land is clear of encumbrances and conduct proper land searches.
2. Another important aspect is to check for availability of amenities like water both public supply and the possibility to dig your private well or borehole, medical facilities, police post etc. A good sewer system, availability of reliable network coverage on both calls and data is also worthy considering. Check for access routes, against government provided maps to make sure there is a road to your parcel of land.
3. Location of the property similarly matters a lot. For potential investors who would wish to build housing units for rental or for sale, location of the land and market demand is another factor to consider. This entails accessibility, reputation of the area, demographic data, and security aspect.
4. There is also the risk of re-possession and encroachment. This is especially where you Purchase land that belongs to the government or land that has a utility which belongs to the government e.g. a road, a park or riparian land. Or for instances where you purchase land in a faraway place that you can hardly visit frequently. Such purchases might result is serious loses. In some scenarios, your legal right over the land gets jeopardised, resulting in litigation and unnecessary legal costs. A good case is the Standard Gauge Railway. The compensation received, may not always be satisfactory.
5. There has been a increase in land fraud cases, some resulting from conmanship while some are outright theft. It is therefore paramount that you engage with trusted agents and institutions when conducting such purchases. Conveyance lawyers, surveyors and land registry department come in handy when you want to avoid falling prey to such individuals.
6. Lastly the cost of the land should also be of importance. You are expected to make sure you are getting the fairest bargain, and that the cost is well withing your budget. If you intend to get financing, you should consider your likelihood of repayment to avoid defaulting and repossession.

Like any other typical investments, it’s advisable that you conduct a proper market research based on your intentions for the purchases, whether you intend to use it for agricultural purposes or develop the land for sale.

Overall, land investment is a lucrative business and similarly a good way of holding money for speculative purposes.

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Author: John Dominic, Euro Trust Real Estate