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Why buying land in the countryside might not be a good idea this Christmas

Real Estate
 

Developing the rural area is easier than the urban. The land is cheaper and there is less likelihood of disputes due to land ownership. [Mose Sammy, Standard]

Amidst the inevitable end-of-year debauchery and runaway profligacy, some investors will be rushing to close mega deals in real estate as a safety net for an unpredictable new year.

Armed with a belief that the direction of real property value can only tend towards the zenith, they will be easy targets for crafty brokers in rural areas looking for easy prey to lure.

And because our Kenyan culture has the urban folk taking celebrations to the rural areas, it is the countryside that is set to profit off these deals made in a haste.

Also, the brokers will be happy to remind them that many African cultures settle for working in the urban areas but building in the countryside for retirement.

When the dualling of the Sh16.7 billion Kenol-Marwa highway began, a landowner whose parcel touched the tarmac near Kenol told Real Estate that the price of his piece of land had risen by over 200 per cent.

Kenol is in Murang'a County and well outside Nairobi, and such lucrative land deals were rare.

Asking price

But amid land economists' insistence that the value of the property was only likely to hike by such proportions if they lay in a hinterland that was being opened up for the first time ever, the landowner reluctantly reduced the asking price over time.

"Business did not happen as I thought. Of course, I have had to revise my prices down because the takers are just not there," he said a few months on.

Jeremy Githaiga bought two acres of land in Namanga in 2008. His goal was to dispose of the land in about two years once some government projects that were to come up boosted the area's economic potential.

He had overheard that a road expansion was underway. Normally, due to the compulsory acquisition of land by the government during road construction and expansion, investors hope they can have the value of their property hike significantly thus making a killing simply out of ceding their land to the government.

But nothing of the sort happened. Fourteen years down the line, Githaiga stares at his idle piece of land sprawled in the middle of nowhere. It did not go as planned.

"At the time, I could have bought just a tiny piece of land in Thika. I had that option but declined. I would have made my profits already, and long ago," he says.

And indeed. Every known economic theory insists that the potential for profit-making is higher the closer one gets to the urban.

The property gets more expensive as one tends towards the heart of cities, and in Nairobi's case, some experts including land economist and former University of Nairobi lecturer George King'oriah believe that land and property prices are greatly exaggerated.

Yet the urban area should be the less attractive place for settlers and, consequently, developers.

The urban area has more people per unit area than the rural areas, thus congestion, and is generally more difficult to develop.

"As a result, the environment gets worse (in the urban areas) and living conditions are often deplorable," says Paul Syagga, a land economist.

"Here, we lack both quality and quantity of housing and other basic amenities. In the village, we only lack quality."

Developing the rural area is easier than the urban. The land is cheaper and there is less likelihood of disputes due to land ownership.

Granted, general boundaries surveying is commonplace in the countryside because bigger margins of error are allowable around these boundaries.

There is generally more flexibility in rural areas.

Building structures that support other amenities that complete the living conditions of people is easier in the village. Materials are more readily available as is land.

"In the rural areas, the structures may look horrible - poorly constructed mud and wattle structures, wooden houses that may look unstable.

"But you will find that these people live better than those in the city who are congested and lack basic amenities," says Prof Syagga.

Economic activities

So then, is it not logical to focus resources here and encourage investors to buy cheap land in the most remote of areas?

The return that these investors expect, based on their preferred economic activities, makes the logic of investing in the countryside flawed.

Very few people are in need of rental houses in rural areas. Fewer still can afford the rental prices that could make such a venture profitable for a developer.

One of the biggest activities anyone buying in rural areas would fancy is agriculture.

Land sellers from areas that are usually dry will be in a rush to dispose of land now that the rains have fallen in the past few months and the vegetation is still lush.

Unsuspecting buyers will salivate at the low prices of land and take the bait. In two months when the rains are gone and the earth is thirsty and dry, they will start looking to pass on their property.

Others will buy swampland or watercourses now that the rains have subsided and get the shock of their lives when the rains return.

Those willing to buy so that they can make a quick return by reselling next year will be ill-advised to buy in rural areas. The market does not support this business idea.

The lack of quality and quantity that Syagga talks about is because the land is scarce and thus expensive in urban areas.

This is especially for settlement. In recent years, swathes of land that were under coffee and tea cultivation in Kiambu County have been converted into real estate, housing the over four million people who inhabit the city, and the over 10 million within the metropolis.

As long as people keep on coming into the city in search of livelihood, land prices will keep on rising and the returns getting more lucrative in the urban areas.

Rural areas will keep on losing.

The minimum house for a family in Kenya, according to the Kenya Housing Policy, should have two rooms plus a cooking area and a toilet.

This is on the assumption that the average Kenyan household has five members.

In the village, in those dilapidated structures, families afford to have their proper two rooms or more, cooking areas in the open, and pit latrines dug in the distance.

"But in the urban areas, space is very rare. Where you are trying to build a latrine, someone else sees the potential to have two, three rentals," says Prof Syagga.

This competition for land means that those who are able to buy in the urban area spend more but also make more.

The rural areas are, however, not bereft of their own potential.

Devolution has brought back to life some of the quietest rural towns and has attracted some key investors in areas that were, for years, devoid of any form of development.

Only it could take longer for the real estate sector to fully develop in some of these smaller towns and any land buyers at this time and era could be staring long into the future.

Office spaces

Yet wily brokers will use promises of Paradise now that devolution has made county governments powerhouses in the rural areas.

It has been a tough year for real estate developers even in the urban. The 2020-21 practice of working from home meant that prime office spaces were largely ditched.

Many moved to the periphery of the metropolitan area as they sought to build their own houses, complete with home offices.

And dwindling incomes amid the trifecta of Covid-19, the Russian invasion of Ukraine and failing rainfall, which increased food inflation, forced many out of the city and into the rural areas where survival was easier.

Yet the urban is still the go-to place for investment in real estate and, unless your investment is for the distant future, buying in the rural area is not the best Christmas decision.

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