Real estate investments comprise of land, buildings for sale, and any natural resources found on this land. This year, the real estate sector is expected to attract investment in office, retail, hospitality and residential areas. Returns will range from 20 to 30 per cent for property developed for sale, while rentals will yield 6 to 8 per cent
Minimum investment:
You can build a maisonette in the lower income segment with between Sh3 to 4 million excluding the cost of land
(Source: Edifice, a local real estate developer.)
Buying land
- You’re likely to get a better price for a parcel of land when buying directly from the owner. However, the easiest way to buy is through land brokerage agents or real estate firms.
- Prices will vary depending on the location of the land.
Pros:
Land doesn’t lose value and can be used as collateral.
Risk level:
High-risk investment requires a lot of capital and long term commitment. It’s best for investors who prefer to invest for the long term and who are willing to commit large amounts of capital.
Yields:
You’ll gain higher if you go for properties for sale. Currently, they attract a 20-30 per cent yield compared to 6-8 per cent for rental properties.
Tax and other/transaction fees:
- Once you buy land, you’ll need to pay title processing fees which is usually negotiable between you and your surveyor.
- Land clearance fees are usually below Sh10,000.
- The seller must pay 4 per cent stamp duty tax to the government upon the transfer of the property.
Looking for a short cut to becoming a real estate owner? Try a REIT. A REIT (real estate investment trust) is a way for you to become a landlord or property developer by buying shares in a company that develops the real estate. You can trade these on the NSE.
There are two types of REITs. Development REITS (D-REIT) focus on constructing/developing real estate, while an income REIT (iREIT) buys high value properties that will yield good interest.
Firms with REITS
Stanlib iREIT (listed on the NSE)
