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Feb 26, 2014

Total transaction costs are low in Kenya


How high are realtors’ and lawyers’ fees in Kenya? What about other property purchase costs?

Transaction Costs

Who Pays?
Stamp Duty for Draft Transfe 2% - 4% buyer
Legal Fees 1.5% buyer
Banker’s Check Charge KES600 (US$7) buyer
Registration KES500 (US$6) buyer
Real Estate Agent’s Fee 1.25% seller
Costs paid by buyer 3.51% - 5.51%
Costs paid by seller 1.25%
ROUNDTRIP TRANSACTION COSTS 4.76% - 6.76%
See Footnotes
Source: Global Property Guide

How difficult is the property purchase process in Kenya?

Foreigners can buy ‘commercial class’ land in Kenya. This type of land is for income or revenue-making purposes. Foreigners are allowed to acquire this and build on it.

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‘Agricultural land’ or farm lands cannot be acquired by foreign individuals. ‘Agricultural land’ is usually owned by indigenous people. If purchase is made through a company – the majority of which must be Kenyan-owned – then it is allowed. The land will be bought under the company’s name.

There are freehold and leasehold types of land. Mostly, land in Kenya is government-owned. This can be leased for 50 to 99 years.

The first step to purchasing property in Kenya is to hire a real estate lawyer. A title search on the property is very important as many areas are not registered. Once property has been chosen and a price is agreed upon, the lawyer prepares a sale agreement as a conditional preliminary contract, signed by both parties. Upon execution, the buyer pays a deposit of 10% to 30% of the purchase price, which is usually refundable if the seller defaults on the transaction.

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Closing is usually within 90 days from signing. During this time, the seller must obtain a clearance certificate from the municipality. This is presented to the buyer to ensure that all local taxes and utility bills have been settled. The lawyer then files a Draft Transfer at the Lands Office and the stamp duty is paid. An official from the Ministry of Lands will come to inspect the property, verify its condition, and make sure that the sale price is in accordance with its actual value. These steps will take approximately two to four weeks to complete.

The lawyer submits the documents to the Lands Office to be able to register the transfer, including the original title held by the seller, clearance certificates, consent transfer and the form for valuation for stamp duty. At the same time, the buyer settles the remaining balance with the vendor. Taxes and lawyer fees is paid within 30 days from closing.

It is possible to purchase in Kenya without being in the country. One can assign a lawyer to go through the whole process on the buyer’s behalf through a power of attorney.



Footnotes to transaction costs table


The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.

Currency:
Kenya uses Kenyan Shilling. Exchange rate is at US$1=KES73.29674 as of 6th July 2006.






Comments

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