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Real-estate investments in Kenya have the potential to double and even triple in value per year-with the right property. So, how does an investor finance a property investment? There are at-least two main options available in Kenya: group investments and mortgages.
Other than being able to prevaricate against risks such as rising inflation, real-estate investors are able to enhance their net worth, generate high capital gains and potentially register quick rates of appreciation.
Property Investment Financing Options
This is the most efficient and commonly used financing option by lower-middle class and those in informal employment who cannot qualify for bank mortgages and loans owing to their irregular source of income.
Group investments, locally referred to as ‘Chamas’, hold more than Ksh80 billion of wealth in Kenya in terms of savings and investment, with one adult in every three being an active member of a group investment club. They have registered the greatest success among women, youths and self-employed people.
The success of group investment is powerfully driven by a cultural impetus to pool funds together to invest and to borrow.
2.Property Loans & Mortgages
There is a thin line between loans and mortgages in Kenya, and people often use the two terms synonymously.
These are facilities offered by various financial and lending institutions, such as banks and building societies, to help you buy property:
Repayment duration for loans and mortgages
Most loan and mortgage applicants in Kenya are oblivious to the hidden charges that come with taking loans and mortgages.
Currently at 4% of the cost of property.
Fees vary depending on the valuation surveyor, and it is crucial you have your own prior to the property being valued.
Determined by mortgage amount. Higher loan amounts attract higher legal fees. Banks have their preferred law firms they deal with, so ensure you learn from the lender their preferred law firm.
Varies between banks and is meant to cover loan facilitation
Charges for clearing the mortgage before the agreed time; varies between
It is not mandatory and it is paid per year. It protects the property during loan repayment period.
Varies between lenders and covers your outstanding balance in case you die.
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