An outline of key aspects to consider when investigating potential investments is vital to protect oneself from underhanded dealings. The following consists of useful tips, important to consider when looking into buying property in Kenya:
1. Conduct an Official Search with the Ministry of Lands
The eCitizen portal allows you to conduct an online title search to reveal the registered owner of the property that you want to buy. Ask the seller for a land reference number (LR) and conduct a search in the appropriate lands ministry registry to confirm that they own the land. To conduct an official search, you need copies of the following documents from the owner of the property:
- KRA PIN
- Identification Card/ Passport
- Title deed or lease
2. Do your Due Diligence
Beyond conducting the preliminary official search; peruse files at the survey office, carry out a physical inspection of the beacons, confirm if acreage set out in the title document resonates with actual acreage on the ground and research whether the property is public. This will help you avoid conflicts with government agencies or/and other interested parties to the same property.
These services are provided by your attorneys at a reasonable fee within the confines of the Advocates Remuneration Order.
3. Review the agreements/ contracts with your lawyer
Due to the size of the transaction, it is important to ensure that you engage the services of an independent attorney to understand the terms and conditions of the sale/ lease agreement with the vendor. Notable items to look out for are:
- The Defects Liability Period- how long the developer of the unit is responsible for repairing any damage arising after the Project is complete
- Any remedies available to you if the developer is unable to complete construction in the stipulated time
- Consequences for terminating the agreement
- The terms of any payment plans/ financing agreements
4. Evaluate your payment plan
Evaluate the developer’s payment plan with current interest rates and monthly rents in mind. If the payment plan is too cheap, it is likely a sign of fraud. You’ve read the news. Can you really own a home of your own in Kenya for less than the rent payment on a similarly sized unit?
Monthly rental for property in Kenya could range from KES 6000 – KES 450000. On the other hand, for those looking to purchase property and not simply rent, prices range from KES 1M – KES 700M depending on the location. Due diligence is vital, and investigating the payment plan weighed against current market and interest rates is important to protect oneself from fraudulent deals.
5. Evaluate the project
It is important to ask the developer for reports and certificates issued by the site engineers and architects. Before and during construction, consulting engineers are responsible for preparing geological reports to assess if the ground is stable and a geotechnical survey assessing the load-bearing capacity of the land and the foundations. This will not only help you to avoid undue repair costs but also confirm that the building is structurally sound to live in. Also, ask the developer for copies of the National Construction Authority (NCA) and the National Environmental & Management Act (NEMA) certificates.
6. Evaluate your developer or seller
Consider whether the developer has completed or is currently constructing any real estate projects in Kenya and scour their Facebook or social media profile for any customer testimonials. Customer testimonials will tell you more about the developer’s workmanship, quality and responsiveness to client concerns while evaluating past or current projects will help you know what to expect from the vendor.
7. Ask for documentation
If you are a legitimate business, documentation confirms the legal relationship between you and your shareholders, vendors and clients. If you are a fraudulent scheme, documentation creates legal liability. Most fraudulent investment schemes avoid issuing documentation in the form of receipts and confirmations; they also dispense with legal requirements such as collecting your identification and tax information. If you are sending money, a legitimate business will issue you with a confirmation or receipt.
8. Ask for a site visit
Real estate transactions require confirmation. If you are buying property or a unit, it is common for the developer to organize a site visit to the development. In addition to due diligence (above), you should have the opportunity to visit the project’s site and view construction progress. If you cannot make it to a site visit, ask someone that you trust to conduct the visit on your behalf.
9. Insist on paying via cheque, wire transfer or RTGS (Real Time Gross Settlement)
In the investments and real estate industry, it is common for businesses to insist on payments made through cheques, wire transfers and real time gross settlements, which are traceable. Insist that the real estate company in Kenya provides you with a confirmation for all funds received.
Remember to keep your eyes open and trust your instincts.
Sources:
http://m.buyrentkenya.com/blog/5-interesting-facts-about-real-estate-in-kenya
