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The dos and don’ts when buying land for speculation

By Graham Kajilwa | November 11th 2021
By Graham Kajilwa | November 11th 2021
Aerial view of land and positioning point area. [Courtesy]

Kenyans would want to cash in on any opportunity they come across as long as they can make a profit.

While this explains why pyramid schemes have thrived in the country, it could also be the reason why most Kenyans rush to buy land with the hope of cashing in when it appreciates.

Others term land as their second bank where they invest in it for better returns compared to banking the idle cash. While buying land or property for speculation is a shrewd move for any businessman, sometimes this venture does not pay off, dies or offers returns below expectations. 

Experts say there are a lot of factors you have to consider when buying land. Also, have a backup plan on how the land or property will be salvaged to give it more value for sale.

Maurice Ochieng, who runs Property & Discounts Ltd, a real estate firm that specialises in distressed property says people should buy land or property for speculation when the economy is looking upbeat.

Currently, he notes this might not be the situation but can change in two or three years. “So if anyone is doing anything for speculation, it is for the long-term, not short or medium term,” he said.

Buying land or property for speculation has to be strategic. He explains that one must research to know probably there will be an upcoming project in that area you want a piece of.

“You know from your sources or whichever way that this area you are buying land, there will be a Konza City of some sort of a planned major development by the government or private entity like a school, college, railway line or road,” said Ochieng.

This project, he says, should be hidden. “When you do it like that, by the time whatever information comes out, the land automatically appreciates and is backed by facts,” he said.

Username Chief Executive Reuben Kimani observes that when buying land for speculation, due diligence must go beyond the title deeds and verifying ownership. One should check the history of the area by visiting it to understand whether the purchase will pay off. “We ask ourselves; how will this area look like 10 years to come?” he posed.

“How was Thika Road for example 10 years ago or Mombasa Road? What are those few characteristics that we can learn from that so that we can apply now?”

Kimani says there are areas which are the Thika Road(s) of tomorrow - where land is expensive - having gone up by more than 100 per cent. One of the characteristics of the land that has potential, he says, is the distance from the Central Business District (CBD) or the nearest urban centre.

For CBD, the distance to work is 50 kilometres. This means one can comfortably commute to work. If it is 100 kilometres, notes Kimani, you can go there only if it is in an urban centre.

“You can also check government plans. This is one of the things we did in 2015 in the Ngong area. If you check statistics, Ngong has the highest appreciation rate, we have been there for the last five years,” said Kimani.

“That place is 40 kilometres away. That time, there were no tarmac roads or railway lines but once we checked the government plans, we realised those are some of the things they were planning to build,” said Kimani. “Some areas may be remote but in 10 years, there might be a superhighway or train station.”

Ochieng says the best way to speculate is by doing a distressed asset purchase - where you are assured of the actual value of the property, yet you are buying it for less. “When you later sell it, you would have made that difference,” he said.

He says Kenyan laws favour buying of land for speculation since owners are not taxed.

“The reason we have a lot of speculation plots in Kenya is lack of taxation passé on idle land. In other countries, when you buy land and do not do anything on it and just wait for it to appreciate, you will be taxed. The government can even repossess it,” he said.

The value of land can also be based on what the next person has done or plans on the land. This means you can buy land in the middle of nowhere, but it will not appreciate until your neighbours decide to put up ‘something’ on their portions. You can as well put up a structure on the land to enhance its value.

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