Land has influenced a lot of policy decisions since independence. Land is behind the wealth of many people and the deaths of others due to violence. Yet for several people, especially ones that hail from the mountain, land ownership creates a sense of wealth and pride. For others, attempts to acquire one have been met by incidences of fraud such that they consider anyone attempting to own a piece of earth as a fellow dancing with the devil. Simultaneously, individuals who have successfully invested in the property have reaped benefits beyond their imagination. To help us join the 5% club of the successful people, I spoke to Mr. Kiama Gitonga, Director & Head of Sales and Marketing, Username Investment Limited. He agreed to offer an expert’s perspective on this subject in this two-part series.
Mr. Kiama Gitonga,
Director & Head of Sales and Marketing, Username Investments.
Mr. Gitonga’s company, Username Investments has enjoyed huge success in the property market and has received extensive accolades such as Best Land and Investment Company, Top 100 Mid-sized Companies Award, Real Estate SME of the Year among many others.
1. In your own words, what is investing in land?
To begin with, investing means committing money into a venture to get value. The term land consists of physical elements bestowed by nature. One of the key economic benefits of land is its scarcity and the rising demand due to population growth.
Thus, investing in land means putting money in a natural asset in the form of a piece of earth with clear boundaries either for residential use, a commercial facility, or as a long term investment that one can resell at a higher value meet a future obligation.
2. Is investing by buying land an advisable option?
Indeed, it is. The land is a crucial resource, and its benefits are grounded on its scarcity. Investors majorly buy property to develop it either for residential or commercial use. Additionally, many available investment opportunities are coupled with overhead running costs, uncertainties and they may require a lot of your time to grow. However, land is an investment that appreciates without incurring overhead costs. Additionally, human activity on land increases its value, e.g. when construction happens on the property or when human activity such as infrastructural developments like road construction, growth of factories, etc. happens. Therefore, the land is one of the sure investments that one can never go wrong with.
Land is a crucial resource, and its benefits are grounded on its scarcity.Mr. Gitonga
3. Preliminary Considerations
If so, what do I need to know before buying a piece of land?
First, identify why you need the property, is it for residential or commercial use? Identification will help you decide where exactly you need to buy land. Once you have named your need, below are the key things to consider before buying land.
• Location – This is crucial when it comes to land investment. Ensure that the land you are buying is near infrastructures such as roads and shares proximity to social amenities such as schools, water, electricity, hospitals, etc.
• Pricing – Compare prices of land in the interest area because you may find different property companies offering land in the same area but at different rates. A comparison will help you avoid buying an overpriced property, while you can get a more strategic property at a much lower price.
• Background research of the property selling company – Engage a real estate company with a robust portfolio of the projects they have done, and the Certificate of Title delivered. Testimonials and reviews from other investors who have experience with the investment companies will give you first-hand information on what to expect in your investment journey.
• Examine the property in person or with the help of a trusted person – Always physically visit any land for sale to experience first-hand on-ground information. An examination is possible during property site visits.
• Find the landowners through a Title Search – Conduct a search of the Certificate of Title to show the actual landowners and whether they have all the necessary rights to transfer ownership to you.
• Engage a Lawyer and ensure you sign the legal documents – It is vital to have a lawyer when you are signing land transfer documents. He/ She helps you understand the various terms and conditions in the papers and their legality.
• Understand Laws and Regulations – National and county rules regulate various constructions in an area. Look to understand how they affect the area you are interested in buying land.
4. Given the incidences of land fraud in Kenya, what would you recommend to Kenyans concerning:
1. Always engage a lawyer when buying land – he will oversee the signing of legal documents and aid you in title search.
2. Buy property from a genuine company – do thorough background research to find a company that has been in existent for a long time and has a history of delivery of Certificate of Titles to investors.
3. Do not buy any property without viewing – always physically see the land and ask to be shown the beacons.
4. Conduct proper research on the area you are investing in to avoid buying an overpriced property.
Other things I would advise people to look out for before buying land
• Strategic location– Look for property in areas with upcoming developments such as The Standard Gauge Railway (SGR), dual carriages, etc. Also, land with proximity to urban areas is an excellent choice.
• Affordability of the land and availability of flexible payment options – buy a property within your income. The good thing about land investment is that you can find affordable plots with prices as low as KES 200,000 and flexible payment options. This allows you to invest with ease.
• Title delivery- Always ensure you buy a property that has a Certificate of Title; this will give you the ability to develop it or resell it in the future.
• Value additions– Purchase land that has added value, e.g. with a perimeter fence, estate gate, graded access roads, water, and electricity. Value addition makes the property ready for immediate development.
Let us turn our heads to financing
5. Is it advisable to take out a loan to buy a piece of land? Or should you wait until you obtain all the monies before buying a piece of land?
You do not need to wait until you have saved enough to invest in land because by the time you are up to KES 500,000 to buy land, the price may have shot up to KES 1,000000. Additionally, the value of land is always higher compared to the interest rate of repaying a loan. Therefore, when repaying a loan say of KES 500,000, the value of land will be higher.
Ngong area, for example, has continued to witness an appreciation of land prices with rates averaging at 12.9% due to continued infrastructural developments such as the recent tarmacking of Ngong – Suswa road, completion of Ngong SGR & SGR Station, the ongoing expansion of Ngong Road and other upcoming developments in the area. A plot that was worth KES 349,000 in 2018 is now between KES 600,000 – KES 1M. An investor who borrowed to buy such property has already finished repaying and has an investment of much more value.
The value of land is always higher compared to the interest rate of repaying a loanMr. Gitonga
Therefore, it is advisable to take a loan to buy land in a strategic location.
6. What institutions offer financing for the purchase of land?
1. Savings and Credit Cooperative Society (Sacco’s) – we have several registered Saccos in our country where one can save and obtain a loan to buy land.
2. Commercial Banks are also offering various loan products to buy land
7. What key elements should you look out for in an offer by a financial institution?
Loan Term – evaluate the loan terms and conditions such as the total payback amount against the intended land investment value and interest rate.
Your debt-to-income ratio – this will help you evaluate how well you will be able to repay your loan without much strain.
Conduct research on the reputation and dependability of your lender – You can quickly obtain this information from reviews by earlier borrowers.
8. If I earn minimum wage, how can I buy land? And obtain financing?
There are several affordable properties with prices as low as KES 200,000 in the market that suit the low and middle-income earners. Better still, a person can explore the below options when looking forward to financing an investment.
Join hands with friends or colleagues and form a Chama – A Chama is a more natural way to pool resources gradually. The small contributions you make will pool enough funds to buy a property together with much ease. For example, if you form a Chama of 10 people and save for a period of 6 months to 1 year, you can buy a property and build homes or build a commercial facility that will generate income for the group members.
Find a genuine Sacco and make savings – You can consider joining a Sacco, save in a given period, and own a property. Also, you will be able to qualify for a loan that you can use to invest in a piece of land. However, it is crucial to conduct due diligence when joining a Sacco so that you enter a genuine one.
9. When buying land, is it advisable to do it through the real estate companies or ‘do it as an individual’?
It is advisable to buy land from a company as opposed to buying directly from an individual. Buying property through a company is helpful as:
Costs:- Companies take care of all the costs and documentation processes on your behalf, which gives you peace of mind. After investing, you sit back and wait for your Certificate of Title to be processed instead of doing it as an individual where you will have to do all the paperwork from the Lands Office to surveyors, lawyers, etc.
Professionalism:-Companies do their work professionally. As a result, you avoid dealing with people who do not understand the land buying journey.
Mode of interaction:-Purchasing from a company allows you to interact with other investors interested in the same project, allowing you to exchange ideas.
10. Is it advisable to use the land as collateral for loans to develop on the land, say apartments? If yes, how safe is it & are the returns workable?
This depends on the location of the property and the target market of the developed apartments. Some investors took loans, developed the land, and reaped benefits. With the right location of a property, the right target market, and the proper pricing of apartments, you will realize returns on your investment.
In conclusion, COVID-19 has exposed our inadequacies in investments. As such, this period presents an opportunity for us to re-evaluate our financial decisions and invest for a rainy day. The key investment is land. However, there is a need to appreciate the intricacies surrounding such an investment before committing your entire savings into it. Subsequently, Mr. Gitonga’s insights will aid anyone that decides to venture in that direction.
Coming up next week
Part 2 of this interview where Mr. Gitonga answers more questions on land issues such as “the green-house investment”, red flags in land deals, ideal places and time to buy land and many more. Stay tuned. Click below to subscribe to become the first to receive this post and other exciting ones by email.