Written by Sarah Wahogo
What is land banking?
Land banking is the process of purchasing undeveloped or underdeveloped land with the hope that its value will rise over time. Many investors buy undeveloped land and hang on to it for some years, sometimes even decades. The land can then be divided and sold in smaller plots, developed for residential or commercial use and sold for a profit.
Why Land Banking?
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Land banking allows room for appreciation at an affordable rate. Buying land in emerging satellite towns offers a higher potential for appreciation due to expected growth and development.
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Land banking counters the issue of scarcity of land. As time goes by, land becomes more scarce and valuable as urban centers grow, particularly in areas close to important roads or infrastructure projects. Land banking, therefore, allows investors to still have a piece of land years later.
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Land banking requires less maintenance compared to rental properties or other investment options, making it a more reliable option for an investor willing to wait for appreciation.
Where Are the Hotspots?
The value of land is significantly impacted by infrastructure development. Land bankers are drawn to areas near the Nairobi Expressway, the Eastern and Southern Bypass, Konza, the future Mau Summit Highway and satellite towns such as Ruiru, Matuu and Thigio. Land in these areas is also attractive to speculative buyers due to its proximity to projects like Konza Technopolis or future Special Economic Zones.
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If done correctly, land banking can be a wise long-term investment. Here’s why:
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Large Capital Gains: In five to ten years, strategic land acquisitions in growth corridors can generate returns of 100–300%.
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Flexibility: Based on the state of the market, you may decide to sell, lease, or develop the land at a later date.
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Tangible Asset: Unless impacted by legal or environmental concerns, land is a tangible asset that never loses value.
But What Are the Risks?
Like any investment, land banking carries its own set of risks:
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Investing without a strategy: Purchasing land based solely on price, without taking development plans, zoning, or accessibility into account, may result in losses.
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Cases of fraud: There have been numerous cases of land fraud in Kenya. To make sure the land has a clean title, investors need to perform the necessary due diligence.
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Delayed returns: Land doesn’t produce income until it is sold or developed, in contrast to stocks or rental property. For investors looking for quick profits, this makes it inappropriate.
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Delayed development: Land value growth may stall if promised water, power, or road projects are delayed or take too long. Examine the area’s master plans, zoning laws, and future infrastructure.
How can you Practice Land Banking Wisely?
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Conduct Research: Examine the area’s master plans, zoning laws, and future infrastructure.
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Collaborate with Reputable Businesses: To lower the risk of fraud, purchase land from reputable real estate companies like Username Investment Ltd. that have a track record of success.
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Site Visit: Don’t depend just on internet listings or brochures. Verify the land’s location, accessibility, and neighborhood growth by doing a physical inspection.
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Examine the legal documents: Make sure the title deed is clear, authentic, and unencumbered. It is essential to conduct a land search at the Ministry of Lands.
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Consider Long Term Value: Land banking is not a way to make quick money. For the best returns, be ready to hold onto the land for a number of years.
So, is it a gamble or an investment?
The answer lies in how you do it. In Kenya, land banking can be a wise and profitable investment if supported by research, due diligence, and a long-term outlook. However, it can also be an expensive gamble, if done carelessly without a plan. Today, land banking is still one of the most promising ways to create wealth for future generations in Kenya, as the country’s real estate market is shaped by ongoing urbanization and infrastructure improvements. Just make sure to rely on professional expertise and have a strategy.
The writer is the CEO of Username Properties Ltd.
