Buying Scenario: Rural Property in Kenya

The majority of property investments made in Kenya are generating substantial amounts of returns for investors, especially in the countryside in areas around national wildlife parks.

For a foreign investor interested in purchasing rural property for investment, especially in properties located in safari/nature areas, they need to be aware of the buying procedure to ensure that they not only make sound investments but also ensure they adhere to the laid-down legal requirements and procedures. So what are these steps?

1. Property search

There are various ways you can search for suitable rural property to invest in such as using web portals, real estate agents, word of mouth and newspaper listings.

• Real-estate agents provide the most ideal means for searching for rural property because they offer additional services such as valuing property, searching and comparing different available rural properties, and they can advise you on viable investment opportunities
• To invest in rural properties located in nature areas, agents do not rely on the usual 5.5% commission. Instead, agent fees for these types of property are determined by the size, type and cost of property.
• Real-estate agents organize with property owners to search for viable buyers, who can buy the property at a specified amount of money. The agent then sets an additional amount over the specified amount to cater for his fee.

1. For instance, for a ¼ acre land close to a national park, the owner can ask for Ksh3.5million, but the agent can make an additional amount of Ksh500,000 as their agent fee, thus the property will be sold at Ksh4 million.
2. This type of agent fee is negotiable and often inclusive of searching and viewing fees.

2. Verify status of the land

• Ensure that as a non-citizen or a company with shareholders who are non-citizens, you buy property on leasehold since such persons are barred by law from owning property on freehold tenure.
• The law allows you to own property on lease for a period that does not exceed 99yrs.
• Also, ensure the property is not on or an agricultural land since the law bars foreigners from acquiring such land as stipulated in provisions of Land Control Act, SEC 24

3. Hire a lawyer: conduct requisite search, property sale & transfer

After finding and verifying the status of the property, with the help of your lawyer, a conditional preliminary agreement is prepared and signed between the two parties.

• Make a 10-30% deposit of the payment.
• If a lender is financing part of the property, you will need to make payments for the part that is not financed, while the lender’s lawyer must ensure they secure the amount of the financed part.
• Once deposit amounts are made and a stamp duty worth Ksh20 is obtained for preliminary agreement, your lawyer should then prepare for property transfer by obtaining the necessarily rates and land-rent clearance certificates costing Ksh7,500 and consent transfer from the nearest Lands office.
• Property inspection and valuation by an inspector of the Ministry of Lands should then follow.
• Your lawyer must then go ahead and seek registration of property transfer.
• Successful property transfer is a cue for you to make the rest of the payment, and 30 days later, you are required to settle taxes and legal fees.

4. Authorization To Develop The Property

If you intend to develop the property in nature/safari area, it is important that you obtain permissions from relevant bodies such as NEMA, Kenya Wildlife Service and the local county council etc., to ensure that the development does not compromise the existing wildlife and habitat.

5. Additional Charges

A 30% of gross rental income and 1% annual property levy are charged to foreign investors.