Why Diaspora dollars elude local real estate

By Mwangi MuiruriMany Kenyans living abroad hope to return home to enjoy a better life, thanks to the investments they have made over time and continue to do. The lessons they learnt as young people of thrift, austerity and sacrifice has inspired many to save millions through blood and sweat.Apart from liberating their families and friends through financial support, they trust the same relatives with the responsibility of investing on their behalf. But some have burnt so badly at the expense of people who are expected to be trusted family members or good friends.An apartment block in Nairobi. The Diaspora is hesitant to invest in Kenya due to lack of a proper investment policy.Joram Ihwagi remembers with regret how in 2003 he sent his relative Sh300,000 to buy him a plot in Ruai, Nairobi. He had saved the amount from proceeds of several odd jobs in the US in the hope of establishing commercial houses on the plot. Today, Ihwagi has no plot because the relative swindled him off the cash."From now on, I think I will save in a bank account until I have enough and I’m ready to return home to take charge of my investment," he says.This was the same case with Kariuki Wachira, a pilot living and working in the US. The Standard reported it recently in our news section. His Sh25 million real estate investment in Nyari Estate was sold fraudulently and efforts to seek answers from the Government have been fruitless. This has been blamed on poor systems at the Lands ministry as well as retention of corruption cartels that connive to fraudulently transfer private property to crooks.Thieving relativesThe situation is further compounded by the perceived lethargic justice system where commercial suits drag. Though the Lands Permanent Secretary Dorothy Angote maintains that streamlining of the land registry will come automatically once a National Lands Policy (now awaiting approval by Parliament) is enacted, many continue to suffer, including those living in the Diaspora who cite lack of creative Government policy structures, thieving relatives and tribalism as reasons for not investing in real estate.Notable towns where Kenyans in the Diaspora have invested include Nairobi, Mombasa, Kisumu, Eldoret, Thika, Athi River and Machakos. Most of those we talked to say the effects of the post election violence were an eye opener on the risk of investing in regions that are the domain of communities different from theirs.Alex Kamotho, a lecturer in Britain, says the Government has failed to support the Diaspora, which contributes a lot to local development. "We are more than 150,000 Kenyans living here and we are classified as one of the most economically active, productive and successful of all immigrant communities in the UK," he says. "That we have a tentative ability of remitting an annual Sh50 billion fails to match the importance that our home Government accords us." The house that was fraudulently soldRemittances from all Kenyans working in the Diaspora surpass the foreign direct investment with an average of $17 billion per annum. Kamotho suggests the Government should come up with Diaspora bonds or treasury bills specifically for them and to be subscribed in pounds or dollars and directly remitted to Kenya via the foreign missions.skewed development"The local real estate sector has been stifled by an influx of foreigners who are too willing to purchase local properties at inflated rates," he adds. "It is evident a lot of properties in major Kenyan towns are overpriced hence out of reach for many locals who are also eyeing the sector."Esther Muraguri works in Canada and says: "My family lost a rental house during the post-election skirmishes and today we cannot collect rent from those who took over."The only option left for her family is to invest in the limited opportunities available in ‘friendly regions’. "This issue is giving this country a skewed development in real estate," she warns. "There is no justification as to why Kenya has yet to formulate a coherent investment policy to utilise the immense financial resources in the Diaspora 50 years after we started leaving for studies, work or settlement abroad."The Government, however, says the Diaspora need not worry. "We have established a fully-fledged department within the Ministry of Finance that is charged with the responsibility of facilitating their remittances and any other investment issue they may raise," said Housing Minister Soita Shitanda.In addition, he says, there will be guarantees to National Housing Corporation (NHC) to enhance compliance with Capital Market Authority requirements to enable it issue housing development and infrastructure bonds to the Diaspora. "They will also benefit from the fast-tracking of the introduction of securitisation of mortgages through the establishment of a National Secondary Mortgages Corporation (NSMC)," Shitanda adds. Tax incentivesThis will also include fast-tracking the gazettement of the Asset-Backed Securities regulations issued under the Capital Markets Act, Cap 485A as well as total exemption of stamp duty for mortgage-backed securities. Shitanda adds that Value Added Tax (VAT) on building materials used to construct housing for low-income groups will be zero-rated. "This is besides providing a Government rebate from stamp duty for low-income home buyers," he says.Kariuki Wachira a pilot living and working in the US displays ownership certificates after he discovered that his investment in Nyari Estate was sold fraudulently Photos Anne Kamon/StandardUltimately, he says, the Diaspora will benefit from the amendment of the Income Tax Act to allow for interest relief for house repayments under tenant purchase schemes at the same level with house mortgages. All these benefits will be communicated to the Diaspora in forums like the Property and Home Living Expo and the Kenya Homes Expo."These bring together professionals, potential investors and stakeholders in the real estate sector, both those living here and abroad, for exploration of opportunities and how best to tap them," he says. The Vision 2030 Blue Print says the housing sector has to be overhauled in terms of legislation and fiscal reforms in order to enable Kenyans afford homes. It suggests tax incentives like the abolishment of capital gains tax to developers.

Why Diaspora dollars elude local real estate

Get Full Access for Ksh299/Week.

Related Topics

Similar Articles

Latest Stories

The Standard Insider

Digger Classified

GET OUR NEWSLETTER

CONNECT WITH US

FOR THE LATEST JOB ADVERTS

Similar Articles

End of an era as Kirubi family exits Sidian Bank in multi-billion deal

Naivasha businesses light up as firms rush to showcase Safari Rally-style services

Kenya's tea sector in crisis talks over shipping route closure

Kenya braced for economic shockwaves from Iran war

DIGGER JOBS

Digger Motors

Digger Real Estate

Why Diaspora dollars elude local real estate

Get Full Access for Ksh299/Week.

Related Topics

Similar Articles

Latest Stories

The Standard Insider

Digger Classified

GET OUR NEWSLETTER

CONNECT WITH US

FOR THE LATEST JOB ADVERTS