Kenya Flag

Kenya: Overview

Last Updated: Sep 12, 2006

Kenya residential real estate prices up

Kenya is sometimes known as the “cradle of humanity.” Many believe the bones of our oldest ancestors lie in the Great Rift Valley. Great safari destinations, with abundant wildlife and beautiful scenery, tourism and horticulture have become major foreign exchange earners, rivaling the tea industry (Kenya is the world’s third largest tea exporter).

Post-independence, Kenya suffered one-party rule under the Kenya African National Union (KANU), and the country’s economy declined due to government intervention and strict regulations. Real GDP per capita has been stagnant for the past two decades.

President Mwai Kibaki’s victory in the 2002 elections ended the 24-year reign of Daniel arap Moi, whose administration was corrupt and economically inept. The Kibaki administration has declared its commitment to ending corruption.

But alas in February 2005, John Githongo, appointed by Kibaki as permanent secretary for ethics and governance, was forced to flee to the UK after receiving death threats. Githongo has written a report summarizing his investigation - and showing that Kibaki’s government is as corrupt as its predecessor.

Despite all this, the economic recovery that started in 2003 has translated into a recovery of real estate prices. Initially, only the luxury market capital values were rising, but recent indicators show a resurgence in the lower middle income segment.

After remaining stable for the past four to five years, rents have started to rise slowly, but not as significantly as the changes in house prices.

Foreigners generally prefer the residential area within an arc covering the south west up to the north east of Nairobi, the capital city. Because of security concerns and the recent breakdowns in the provision of the basic utilities, there is increased demand for accommodations within secure compounds with their own water supply and back-up generator.

The Nairobi sales market can be divided into two, according to Knight Frank. The first one is the owner-occupier buyers that dominate the ten to twenty million Kenyan Shillings (US$136,432 – US$272,863) market, where most of the transactions occur. The second one is the investors and speculators, mostly wealthy individuals and institutions, market that operates above the KES20 million (US$272,863) range.

Foreigners can freely buy ‘commercial class’ land in Kenya. This type of land is for income or revenue-making purposes.

RENTAL YIELDS

Last Updated: Oct 05, 2009

Reasonable yields in Nairobi

Apartments in Nairobi have reasonable gross rental yields of between 7.6% to 8.5%, and attractive buying prices at around US$1,000 per square metre.

Houses are considerably more expensive on a per square metre basis, often breaching the US$2,000 per square metre threshold.

Read Rental Yields  »

TAXES AND COSTS

Last Updated: May 11, 2009

Kenya's rental income tax is high

Effective Tax Rate on Rental Income
Monthly Income US$1,500 US$6,000 US$12,000
Tax Rate 30% 30% 30%
Click here to see a worked example
Source: Disclaimer

Rental Income: Kenyan gross rental income earned by a non-resident is subject to tax, withheld at source at 30%.

Capital Gains: No tax is levied on capital gains realized from the sale of real property.

Inheritance: There are no inheritance or gift taxes.

Residents: Residents are taxable on worldwide income at progressive rates, from 10% to 30%.

Read Taxes and Costs  »

BUYING GUIDE

Last Updated: Aug 02, 2006

Total transaction costs are low in Kenya

In the absence of corruption (which is virtually impossible in Kenya) the total round-trip transactions cost would be just around 6.76%, inclusive of the 1.25% real estate agent’s commission.

The seven procedures needed for the titling of the property can typically be completed in 39 days at 4% cost, according to the World Bank.

Real estate transactions are normally quoted and concluded in Kenyan Shillings.

Read Buying Guide  »

LANDLORD AND TENANT

Last Updated: Jul 05, 2006

Landlord's rights are strong in Kenya

Kenyan rental market practice is pro-landlord.

Rent: There is no rent control at the upper end of the market. Prior to occupancy, the tenant normally pays a quarter’s rent in advance and an additional one month’s rent as security deposit.

Tenant Evictions: Landlords carry out evictions themselves, even if the law mandates that only the courts can order an eviction. Landlords can also seize the tenant’s possessions for compensation of unpaid rents.

Read Landlord and Tenant  »

ECONOMIC GROWTH

Last Updated: Sep 12, 2006

Cradle of corruption and poverty?

Investments in telecoms, transport and electricity and the continued recovery of tourism in 2005 have given the economy a much needed boost.

Falling interest rates have led to a drop in mortgage rates. The lending rate of commercial banks on loans and advances was at 13.16% in December 2005, significantly lower than the 26.13% level in 1998.

Political veteran Mwai Kibaki won a landslide election victory in December 2002, promising to fight corruption and to address Kenya's economic woes. He replaced Daniel arap Moi, who had been in power for 24 years. Kibaki ended nearly 40 years of rule by the Kenya African National Union (Kanu) with his landslide election victory.

Despite President Kibaki's anti-corruption pledges, some donors estimated that up to $1bn had been lost to graft between 2002 and 2005. Leading anti-graft official John Githongo resigned and had to flee the country when some of his findings fingered top politicals. Aid donors are becoming increasingly concerned.

Aside from corruption, Kenya’s gargantuan problems include poverty, which afflicts 92% of the population, high unemployment and crime.

 

  • Pro-landlord rental market
  • Moderate yields in Nairobi
  • Corruption & poverty woes
  • Security & political concerns
  • High rental income tax of 30%

RESIDENTIAL PROPERTY FACTS
Price (sq.m): n.a. Rental Yield: 4.52% For a sq. m. property, usually an apartment.
Rent/month: $1,445 For a sq. m. property. Income Tax: 30.00% Assumptions: Owners are a non-resident couple drawing US$ / €1,500 per month in rent, with no other local income.
Roundtrip Cost: 6.8% The total cost of buying and then reselling an apartment. Includes:

* all transaction taxes and charges:
* lawyers' and notaries' fees
* agents' fees

Assumptions: The buyers are non-resident foreigners. The apartment cost US$250,00 / €250,000. 		Cap Gains Tax: 0.0 Assumptions: The property was bought for US$250,000 / €250,000, and sold 10 years later, after a 100% appreciation.
Landlord & Tenant Law: Pro-Landlord Rating is based on a detailed study of each country’s law and practice.
MARCH 2009
APRIL 2008
JANUARY 2008
DECEMBER 2007

Real estate news »   News archive »

Subscribe to our Newsletter!

Enter your email address to sign up.