Land has become one of the most sought-after assets in the country. Be it for investment or settlement, the demand for land keeps growing. This has made the prices shoot in the last few years with an average growth rate of 10% annually.
However, the need to own land is also driving potential investors to make blind investments that result in losses. This happens either through buying land in the wrong locations or buying fraudulent land. The article will focus on the factors to consider when purchasing land in Kenya.
These factors comprise some of the key areas and due diligence measures to take. Doing this reduces the chances of making wrong land decisions that could result in millions of losses.
Location is a key element when it comes to purchasing land. This is because 90% of a land’s value is determined by its location.
Normally, Land in urban locations tends to be more valuable than those in remote areas. Hence, you need to make this a first item to check if you are planning to purchase land in Kenya.
Some of the other elements that affect the location are weather, security, and access to various supporting services such as water, electricity, and internet.
Land in areas with good weather has more value since its habitable and hence more demand. Good weather attracts land activities such as farming and settlement. On the other hand, Land in dry areas costs less due to the limitations of its use.
Locations with security challenges also attract less interest from investors resulting in low value. Hence, before purchasing land, ensure the location you are targeting is secure to avoid holding a dead asset.
Other factors to consider when choosing a land location include the availability of infrastructures such as roads, access to water, and power. These are key in supporting land use either for commercial or residential purposes.
Areas with well-developed infrastructure will give land more demand and hence more value.
The price remains a critical factor when purchasing land in Kenya. As a buyer, your goal is to get good land at the best price possible. If you are buying land for speculation, then you need to get it at the lowest price possible.
As discussed earlier, land that is located in a strategic area always attracts better prices due to high utilization value. Other factors that will affect the prices include taxes and size.
A bigger piece of land will attract higher prices and vice versa. Some of the factors that determine the size of land to buy include the intended use and government regulations.
If the price of purchasing land is beyond your capability, you can either choose to take a loan or lease. Check Out the Factors to Consider Before Taking a Loan in Kenya.
There are various uses for the land. Some of these include Farming, speculation, and investment both in residential and commercial real estate.
Hence, you need to set the user before purchasing land. The use is what will help you determine some factors such as location, size, and investment you are willing to commit.
As an example, if you are buying land for use in farming, you need to factor in elements such as the size, availability of supporting infrastructures such as water and roads, and finally the weather. Mostly, farming requires a bigger size of land to make it sustainable.
A land whose use is speculating needs to be in areas with high future growth potential. This is because speculation has the expectation the land will appreciate in future value enabling the buyer to sell it at a profit.
If you are planning to purchase land for building residential real estate, you need to consider the allowed residential areas. Mostly, residential land is located away from the town centers. There are also other amenities to consider such as access to schools and shopping centers.
Residential land should be in a quiet area that is also secure and has suitable weather. You should also factor in government regulations regarding residential real estate investment. You can get this information from your local county government offices.
Land for commercial purposes such as the building of offices and shopping malls should be located mostly in town centers of areas that are easily accessible to the public.
4. Legal position
The legal position of the land is a key factor to consider when purchasing land in Kenya. Land in the country exists either as a leasehold or freehold. Having leasehold land means the land ownership is limited to a certain period. Mostly, leasehold land in Kenya has a 99 years tenor. After expiry, you can either choose to renew the lease or return the land to the government.
With freehold land, you can own it in perpetuity without any expiry timeline. Hence, you need to check this status before purchasing it to avoid future surprises.
Land search is also an important step before purchasing land in Kenya. Search helps you to ascertain the owner and ensure you are doing a transaction with the real dealer. It also helps to identify if the land has any pending disputes or has been used as collateral to get credit.
You can search online through the ministry of lands Ardhisasa portal.
Finally, you need to factor in rates and taxes that arise when and after purchasing land. A key example is land rates and capital gain tax. Land rates are payable to the local county yearly. Hence, you need to plan as this will become an annual after buying the land. Failure in paying these rates could result in penalties or prosecution.
On the taxes, there is a 5% capital gains tax that you should pay during a land transaction on the value appreciation.
The above factors to consider when purchasing land in Kenya is key in ensuring you get a good deal in the transaction. Take your time before committing your money to do the research. All the best.