How Kenyans Living in the Diaspora Can Invest in Real Estate in Kenya

Why Invest in Kenyan Real Estate?
Kenya's real estate market offers various benefits:

• High Returns: Real estate in Kenya can yield high rental income and capital appreciation. 
• Economic Growth: Kenya's economy is growing, with significant infrastructure development. 
• Diversification: Real estate offers a stable investment option to diversify your portfolio. 
• Patriotic Duty: Investing in Kenya contributes to national development and creates employment opportunities.

• Freehold Land: Generally, freehold land ownership, which grants the owner perpetual ownership, is not available to foreigners, including Kenyans living abroad if they have acquired foreign citizenship. Only Kenyan citizens can own freehold land. 
• Leasehold Land: Kenyans living abroad can own leasehold land, which typically grants ownership for a period of 99 years. This is the most common form of property ownership available to non-citizens and those holding dual nationality.

• Land control Act: The Land Control Act restricts the ownership of agricultural land by foreigners. For Kenyans who have acquired foreign citizenship, purchasing agricultural land requires approval from the Land Control Board. This restriction aims to protect agricultural land and regulate its use.
• Special Permissions: In some cases, special permissions can be sought, but the process is stringent and approvals are not guaranteed.

• Compliance with Local Laws: Kenyans living abroad must comply with all local laws and regulations related to property ownership. This includes adhering to zoning regulations, building codes, and any other local ordinances.
• Due Diligence: Ensuring thorough due diligence is conducted is crucial. This involves verifying the property’s title, ensuring there are no disputes, and checking for any encumbrances. Engaging a lawyer in Kenya is highly recommended to navigate these legalities.

• Property Taxes: Owners are required to pay property taxes, including land rates and any applicable charges related to the property.
• Income Tax: If the property is rented out, the rental income is subject to Kenyan income tax, and the owner must comply with tax filing requirements in Kenya.

• Eligibility for Mortgages: Diaspora Kenyans are eligible for mortgages from Kenyan financial institutions, but they must meet specific criteria. This includes providing proof of income, credit history, and fulfilling the deposit requirements
• Deposit Requirements: Typically, a deposit of 20-30% of the property value is required for mortgage approval. Banks may also require detailed documentation and evidence of the ability to repay the loan.
• Currency Exchange: Managing currency exchange risks is important, as fluctuations can affect mortgage repayments if the income is in a different currency than the mortgage.

• NEMA Approvals: For properties requiring environmental clearance, approvals from the National Environment Management Authority (NEMA) are mandatory. This is particularly relevant for developments that may impact the environment.
• Investment Promotion Center (IPC): Large-scale property investments might require registration with the Investment Promotion Center, particularly if they fall under commercial or industrial categories.

• Trust Issues: Many Kenyans in the diaspora opt to purchase property through relatives or trusted friends. However, this can lead to issues of trust and mismanagement. It is crucial to have formal agreements and possibly involve professional services to oversee such investments.

• Foreign Exchange Regulations: There are regulations regarding the repatriation of funds for the purchase of property. Kenyans abroad must comply with Central Bank of Kenya regulations concerning foreign exchange to avoid legal issues.

1. Engage a Real Estate Agent: Use reputable agents registered with the Estate Agents Registration Board (EARB).
2. Choose a Property: Select a property that meets your investment goals.
3. Conduct Due Diligence: Verify the property's title, check for any encumbrances, and ensure it is free from disputes.
4. Offer and Acceptance: Negotiate terms and make a formal offer.
5. Sale Agreement: Sign a sale agreement, outlining the terms and conditions.
6. Pay Stamp Duty: Typically 4% of the property value.
7. Transfer and Registration: Complete the transfer process and register the property at the Lands Registry.

• Use Reputable Agents: Engage only with licensed and reputable agents.
• Conduct Thorough Due Diligence: Verify all documents and conduct title searches.
• Engage a Lawyer: Always have a qualified lawyer oversee the transaction.
• Avoid Cash Payments: Make payments through traceable methods like bank transfers.
• Verify Seller’s Identity: Confirm the identity and ownership of the seller.

Many diaspora members face challenges trusting relatives due to past experiences of mismanagement or fraud. To mitigate this risk, it’s advisable to use professional services and conduct transactions through official channels.
Investing in Kenya while living abroad is a common aspiration for many in the diaspora. However, a significant challenge faced by many diaspora investors is the issue of trust, particularly when relying on relatives to oversee their investments
This challenge is especially pronounced among Kenyans living abroad who wish to invest in real estate or other ventures in Kenya. Here are several reasons why trusting relatives with investment decisions can be problematic:

1. Past Negative Experience
Mismanagement of Funds
Many diaspora investors have experienced situations where their relatives mismanaged the funds intended for investment. This mismanagement can range from using the money for personal needs to investing in projects that do not yield any returns.
Fraud and Deception
Instances of fraud and deception are not uncommon. Some relatives may provide false information about the status of investments, progress of construction, or actual costs involved, leading to significant financial losses for the investor.
2. Lack of Professional Expertise
Inexperience in Real Estate
Relatives may lack the necessary experience and expertise in real estate or the specific business the diaspora member is investing in. This inexperience can lead to poor decision-making, selection of low-quality contractors, or failure to adhere to legal requirements.
Limited Knowledge of Market Conditions
The real estate market in Kenya, like any other market, requires a deep understanding of current trends, pricing, and legal regulations. Relatives without this knowledge may make uninformed decisions that adversely affect the investment.

Time Zone Differences

Living in different time zones can make communication challenging. Miscommunications and delays in receiving updates about the investment can lead to misunderstandings and mistrust.
Limited Direct Supervision
Diaspora investors are often unable to directly supervise their investments, relying instead on second-hand information from their relatives. This lack of direct oversight can result in a lack of accountability and transparency.
4. Emotional Conflicts
Family Dynamics
Family relationships can complicate business transactions. Emotional ties and obligations may lead relatives to make decisions based on personal relationships rather than sound business practices.
Fear of Straining Relationships
Addressing issues of mismanagement or fraud can strain family relationships. Many diaspora investors may avoid confronting their relatives about these issues to maintain family harmony, even if it means financial loss.
5. Different Financial Priorities
Diverging Interests
Relatives in Kenya might have different financial priorities and urgencies compared to the diaspora investor. They might prioritize immediate personal financial needs over long-term investment goals.
Pressure from Extended Family
Relatives entrusted with investment funds may feel pressure from other family members to use the money for non-investment purposes, such as paying for medical bills, school fees, or other emergencies.