Can Your Chama Successfully Navigate Real Estate Investments?

by | Aug 30, 2024 | Real Estate Market Intelligence | 0 comments

  • Your Chama and You: Is it a Worthwhile “Investment”

  • Your Chama: Governance Challenges and Risks

  • Your Chama and Real Estate

      • Investment Strategy and Decision-Making Structures

      • Establish Clear Ownership and Exit Strategies
        Consideration of Financing Options

      • Your Chama Should Consider Diversification

      • Your Chama Must Set Realistic Expectations

      • Prioritize Regular Communication and Updates

      • Plan for Property Management

      • Understand the Legal and Tax Implications

      • Your Chama Must Have a Contingency Plan

Key Takeaways

Your Chama and You

Your Chama, like many others in Kenya and across Africa, is a vital part of the financial landscape. Chamas offer a way for people to save money, access credit, and invest in opportunities often out of reach for individuals. Typically made up of friends, family, or colleagues, these groups pool resources to invest collectively, promoting financial inclusion and empowerment.

Your Chama and You: Governance Challenges and Risks 

While Chamas have helped many achieve financial goals, there’s a growing awareness of the limitations and risks of this model. Investment goals are deeply personal. The challenge of promoting selfless thinking in a group often undermines the success of Chamas.

There are, however, notable success stories. Some Chamas have grown beyond their founders’ visions and gained national recognition. Centum, for instance, is now a publicly traded investment company that began as an investment club in 1967. TransCentury is another success story, founded in 1997 by a group of friends who pooled resources to invest in infrastructure and energy projects across Africa. You’d do well to study their path and the keys to their success and longevity.

The saying goes, “If you want to go far, go with others.” But it doesn’t mention the importance of choosing the right companions. Your journey shouldn’t be shared with just anyone. Even a family member can be the wrong choice for a fellow traveller.

Given the risks Chama members face, how can they reduce their individual risks when investing in real estate through their groups?

There may not be foolproof rules, but here are some steps they can take:

Your Chama and Due Diligence

Real estate investments are illiquid, high-stakes investments, and the importance of thorough due diligence cannot be overstated. Your Chama should ensure that the property is thoroughly vetted before committing to any real estate investments. This includes assessing the property’s legal status, verifying ownership, checking for any encumbrances, and understanding the local market conditions. Engaging a reputable lawyer and real estate expert can help avoid costly mistakes.

Investment Strategy and Decision-Making Structures

Real estate investments can vary widely—from buying and holding residential properties to developing commercial real estate. Your Chama members should align on the specific real estate investment strategy. Whether the goal is long-term appreciation, rental income, or quick flips, everyone needs to agree on the approach to avoid conflicts down the road. Not the silent head nods, rather, an active engagement and commitment to the strategy.

Establish Clear Ownership and Exit Strategies

When investing in real estate as a group, it’s essential to establish clear ownership structures and exit strategies. Your Chama members should decide in advance how ownership will be divided, how profits will be shared, and what the process will be if a member wants to exit the Chama or liquidate their share. This prevents disputes and ensures that everyone knows their rights and obligations. Adopt strategies that allow for exiting members to transition away as seamlessly as possible.

Consideration of Financing Options

Real estate often requires significant capital, and Chamas may consider financing options such as loans or mortgages. It’s important to carefully evaluate the terms of any financing, including interest rates, repayment schedules, and the impact on the group’s cash flow. Avoid over-leveraging the group, as this can increase risk and strain the Chama’s finances if the property does not generate expected returns.

Your Chama Should Consider Diversification

While real estate can be a lucrative investment, it’s also important not to put all your eggs in one basket. If your Chama holds its entire portfolio in a single property or a specific type of real estate, it becomes vulnerable to market downturns or other unforeseen challenges. Consider diversifying within real estate (e.g., residential, commercial, land, income-generating, and capital-gains properties) or balancing real estate investments with other asset classes, especially those that are more readily convertible to cash.

Your Chama Must Set Realistic Expectations

Real estate investments typically take time to mature, and returns may not be immediate. Chama members need to set realistic expectations about timelines, potential returns, and the risks involved. Ensure everyone understands that real estate is often a long-term investment and that patience may be required before seeing significant gains.

Prioritize Regular Communication and Updates

Given the significant financial commitments involved in real estate, it’s crucial to maintain regular communication among Chama members. Provide frequent updates on the status of the investment, any challenges or delays, and financial performance. This transparency helps to build trust and ensures that everyone remains informed and engaged in the investment process.

Plan for Property Management

Once a real estate investment is made, managing the property becomes an ongoing responsibility. Whether it’s finding tenants, handling maintenance, or dealing with legal issues, property management can be time-consuming and complex. Decide in advance who will be responsible for property management tasks or consider hiring a professional property management company if the Chama lacks the expertise or time to handle it effectively.

Understand the Legal and Tax Implications

Real estate investments come with specific legal and tax obligations. Your Chama should be aware of the tax implications of buying, holding, and selling property, including zoning, applicable property taxes, capital gains taxes on disposal, and any applicable fees. Consulting with a tax advisor or accountant can help the group navigate these complexities and avoid any legal or financial pitfalls.

Your Chama Must Have a Contingency Plan

Real estate investments can be unpredictable, with potential issues ranging from market downturns to unexpected repairs or vacancies. The Chama needs to have a contingency plan in place, including a financial reserve to cover unexpected costs. Planning for worst-case scenarios can help the group weather challenges without resorting to panic decisions that could harm the investment.

Conclusion

These measures are tailored to the specific challenges and opportunities of real estate investing, helping to ensure that Chama members approach such investments with a clear, strategic mindset. Members of Chamas should consider them as having applicability to the Chama broadly, but also to themselves specifically so that they take “joint and several” ownership for their investments. They won’t preclude the many pitfalls that Chamas face in building the “collective”. But they will guide the mindset that members ought to apply in their collaborative efforts.

Inevitably, the success of Chamas investing in real estate will be determined by how best they will navigate their internal group dynamics, and by factors not entirely within the control or responsibility of any of the members individually.

Property Encumbrances: Cautions, Caveats & Restrictions And What You Need to Know About Them – PART 1

by | Aug 12, 2024 | Real Estate Market Intelligence | 0 comments

  • What are Property Encumbrances?

  • What is a Caution?

  • What is a Caveat?

  • What is a Restriction?

  • Main differences between Caveats, Cautions, and Restrictions?

Property encumbrances are any claims, liens, or liabilities attached to property that can limit its use, transfer, or even have a direct impact on its value. Encumbrances affect the property owner’s ability to fully enjoy or freely dispose of the property.

For example, a beneficiary with a  legitimate grievance on the distribution of their benefactor’s property (for example the child of a deceased person who stands to gain an inheritance of their deceased parent), can apply for the placement of a restriction on a property to dispute that distribution to other beneficiaries until such time as their grievance is heard and determined. 

Property Encumbrances broadly fall into two main categories:

  • Financial Encumbrances: These include liens and mortgages, where a financial claim is placed on the property, often due to a debt owed by the property owner.
  • Non-Financial Encumbrances: These include easements, restrictions, caveats, and cautions, which limit how the property can be used or transferred without necessarily involving a financial obligation.

In Kenya, cautions, caveats and restrictions are all legal tools used to either notify the public at large of the property rights of individuals or entities other than the property owner and to protect property rights and prevent unauthorized dealings in property.

Strictly speaking, cautions cannot “technically” be classified as a form of encumbrance since they do not compel or absolutely deter dealings in the property except for calling to attention the right of existing third-party rights.

They however serve different purposes and are initiated under different circumstances. It is important to understand their purpose(s) and how they differ:

What is a Caution:

A caution is a notice on a property title indicating a third party’s interest in a property and serves the purpose of warning, or alerting any prospective buyers or stakeholders of an existing claim or dispute around the property. It notifies anyone intending to deal with the land of the cautioner’s interest, typically urging further inquiry or caution in transactions involving the property.

In terms of being an encumbrance, a caution merely serves the purpose of notifying or warning interested parties that a third party claims an interest in the property – it does not prevent any dealings in the property. A husband or wife going through a divorce, for example, may place a caution on their matrimonial property registered in the other’s name to deter them from engaging in dishonest dealings in the property, or dealings that favour one over the other without the approval of both. It wouldn’t stop, for example, a potential purchasor from acquiring the property. However, the buyer would be notified of the claim by the spouse whose name isn’t on the title records.

A caution may be lodged by anyone who has a “cautionable” interest in the land, which can be less substantial than ownership, such as a leaseholder, a person with a contractual right, or someone with a prospective interest. The threshold for lodging a caution is lower than that of a caveat.

What is a Caveat:

A caveat is a legal notice filed by a party claiming an interest in a property, which serves to prevent any transactions on that property without their knowledge. It essentially signals a warning that someone else has an interest in the property and seeks to protect that interest.

As an encumbrance, a caveat serves the purpose of restricting the owner’s ability to freely sell, transfer, or mortgage the property. When a caveat is registered, it effectively freezes any further transactions on the property unless the caveator (person lodging the caveat) consents or a court orders its removal.

To lodge a caveat, one must have a recognized legal or equitable interest strong enough to justify halting any transactions. This interest could include an unregistered owner, mortgagee, or any person with a vested interest in safeguarding their rights over the property. Caveats are therefore more substantial and assertive in establishing a right than Cautions, as they directly bar any further dealings.

What is a Restriction:

A restriction is typically imposed by a court, public authority, or other official entity in order to regulate or limit certain dealings on the property and is often used by authorities or officials to enforce compliance with legal or regulatory requirements.

A restriction is often imposed to ensure that certain conditions are met before any property transactions can take place. Restrictions have the effect, as an encumbrance, of limiting how the property can be used, sold, or mortgaged. The owner must comply with the specified conditions before making any changes to the property status.

 

The main differences between Caveats, Cautions, and Restrictions

Feature

Cautions

Caveats

Restrictions
Who initiates? Any interested party Any interested party Land Registrar, court, or government body
What is the purpose? Signals interest without blocking transactions Prohibits any dealings on the property To enforce regulatory or legal compliance
What is the Scope? Does not prevent any dealings in the property but warns prospective dealers of interests that may not be obvious. Prevents any dealings without consent Limits or regulates specific dealings
Threshold Low; can be lodged by anyone with an interest High; requires significant legal or equitable interest Necessity to protect legal, financial, or equitable interests, especially in cases of disputes, criminality, shared ownership, or compliance needs.
Process for Removal Can be removed by Registrar, cautioner, or upon notice Typically requires court order or consent from the caveator By the Registrar of Lands or through a court order
Impact on Transactions Notices potential claims; allows transactions with caution Halts all property dealings until resolved Halts all property dealings until resolved
Risk of Misuse Higher likelihood; low entry barrier Lower likelihood; stricter requirements for lodging Lower likelihood; stricter requirements for lodging
Typical Uses Legal compliance, dispute resolution Pending sale, inheritance, or debt claim Compelling compliance

 

Examples of Situations Where Restrictions May Be Used

If a public official is under investigation by the Ethics and Anti-Corruption Authority (EACC) under suspicion of acquiring property(ies) using the proceeds of corruption, then the Authority can request the investigating body to restrict the subject property(ies) suspected to have been acquired using such proceeds.

The Directorate of Criminal Investigations (DCI) would in turn forward the request to the Registrar of Lands to place a restriction on the property until such time as the matter under investigation (or for that matter before the court) has been heard and determined.

This restriction would only be lifted on acquittal of the public official. Alternatively, if found guilty, then the property(ies) would be confiscated by the agency responsible for the recovery of proceeds of corruption, usually the EACC.

Another example of when authorities may place a restriction would be when private land has been reclaimed for public utilities, such as roads, and there is an intervening period where an unsuspecting buyer may make an offer to buy a property that the Government has already earmarked for compensation to the owner.

The restriction would ensure that an unsuspecting buyer doesn’t get duped into paying for a property that the Government has already compulsorily acquired or compensated a “would-be seller”.

Conclusion

Cautions, caveats, and restrictions serve as essential tools for balancing ownership rights with third-party interests and legal compliance in property management.

While property owners have the right to control and dispose of their assets, encumbrances ensure that any claims, unresolved interests, or regulatory requirements are respected, thereby protecting all parties involved. For prospective buyers, lenders, and stakeholders, understanding these mechanisms is crucial for informed and secure dealings.

Ultimately, cautions, caveats, and restrictions uphold fairness and transparency in property transactions, reinforcing a legal framework where individual rights and public interests coexist harmoniously.

Private Settlements: A Fast, Flexible Path to Property Deals in Kenya

by | Aug 1, 2024 | Buying, Selling, Leasing & Rentals, Property Market Advisory Series, Real Estate Market Intelligence, Writer's Commentaries | 0 comments

  • An Introduction to Private Settlements?

  • What Are Private Settlements?

  • Benefits of Private Settlements

  • Scenarios Where Private Settlements Excel

  • What Makes Private Settlements Attractive?

  • Potential Drawbacks of Private Settlements

  • Conclusion

An Introduction to Private Settlements?

Private settlements are unfamiliar to many, but they can offer great benefits for both buyers and sellers. In particular, for properties that present unique opportunities or whose disposal presents unique challenges, private settlements can be very ideal.

In Kenya, the usual way to handle property transactions is within a 90-day window. This isn’t set by law but is a widely accepted practice. Sometimes, plot sellers offer longer payment terms, like 6 to 12 months, especially for lower-end markets. With private settlements, these periods, for example, can be extended to much lengthier periods for the fulfilment of conditions upon which the agreement sets out conditionally, as long as both parties concur.

Private settlements offer a personalized touch, often leading to quicker sales and better outcomes for both parties. With the rise of private mediation, these kinds of transactions are gaining attention. Whether you’re in Kenya or part of the diaspora, private settlements could change the way you invest in property.

What Are Private Settlements?

Private settlements are property deals negotiated directly between a buyer and seller, or by parties who wish to make a self-determined agreement they co-own without subjecting themselves to court-determined action, public auction or listing of these properties. These deals are customized to meet the specific needs of both parties, making the process more efficient and tailored.

For example, a buyer and seller might enter into a private settlement to create a seller-financed deal that extends their transaction timeline to as many as three years or any other agreed period, depending on their agreement.

Another example would be when beneficiaries of an inherited property, who might be in dispute or lack the resources for probate, work with a developer under a joint venture. They can establish a joint venture through a private settlement, agreeing to terms that protect everyone’s interests. In this way, beneficiaries can progressively exit ownership of the property until the conclusion of probate, while the developer can enhance the property’s value and profit from it.

Similarly, a married couple undergoing divorce, can make a private settlement for the division of their marital properties and have their agreement adopted as part of their divorce decree without prejudice.

They give the parties confidentiality to handle their matters outside of public purview.

While they are by and large considered a course of action taken only where disputes between parties subsist, private settlements are also “curative” in their nature and can be used to reduce the risks that would arise from disputes.

Benefits of Private Settlements

  • Speed and Efficiency – Quick Sales: They allow for quick deals. Sellers can skip the long process of listing, marketing, and waiting for offers, making it ideal for those needing a fast sale. They can also avoid lengthy legal processes by having a clear agreement that outlines their goals.
  • For instance, a family with an inherited property that hasn’t undertaken succession of their deceased relative’s property would usually have to wait until that process is completed. If a buyer presents, even if the family can prove ownership, it’ll be tough to sell before succession. However, a private settlement can be drafted, detailing terms that protect both parties. This might include the buyer’s rights to the property and a payment schedule tied to the succession progress. Private settlements offer a streamlined process that is more direct, efficient and less bureaucratic.
  • Tailored Agreements – Bespoke Transactions: Private settlements let buyers and sellers create agreements that fit their specific needs, including payment plans, possession dates, and unique conditions.
  • Confidentiality – Privacy: These deals are more discreet than public sales, keeping the details and parties involved confidential.

Scenarios Where Private Settlements Excel

  • Probate Properties & Properties that are Subject of Property Division in Divorce Matters – Selling properties under probate can be tough. They offer a streamlined solution for heirs wanting a quick sale, reducing the emotional stress of public sales. Also, properties that are subject to division when divorce happens are ideal for distribution or sale under a private settlement if the couple divorcing can agree to terms that are mutually beneficial to both of them and a prospective buyer should they choose to secure a quick exit under an amicable agreement.
  • Seller-Financed Transactions – Flexible Financing Options: When sellers offer financing, private settlements allow flexible terms that benefit both parties. This can include customised interest rates, repayment schedules, and down payments, making property buying easier for those who might not get traditional bank loans.
  • Urgent Sales Required – Immediate Cash Sales: Sellers facing financial issues or urgent relocation can benefit from private settlements by getting immediate cash offers and closing deals quickly. Private settlements in such instances would be ideal for buyers looking to get bargains with inherited properties, or even those sellers in distress.
  • Unique Properties – Niche Market Sales: Properties with unique features or in niche markets might struggle to find buyers through public listings. They allow targeted negotiations with interested parties, ensuring the property is sold to someone who values it.

What Makes Private Settlements Attractive?

  • Personalized Negotiations: Direct communication between buyer and seller allows for more personalized and flexible deals.
  • Cost Savings: Avoiding real estate agent fees and marketing costs makes the transaction more cost-effective, freeing up money for other needs.
  • Legal Flexibility: Private settlements allow for tailored legal agreements that meet the unique needs of both parties.

Potential Drawbacks of Private Settlements

  • Lack of Market Exposure: Public listings reach a broader audience and provide market feedback. Without this, sellers might miss out on potential buyers and market insights.
  • Risk of Unfair Terms: Sellers might negotiate from a weaker position, leading to poorly negotiated deals. Professional mediation can help ensure fair terms.
  • Gaps in Due Diligence: Buyers must conduct thorough due diligence since private settlements may lack the oversight and transparency of traditional transactions. While these deals can offer great bargains, buyers should always insist on high levels of due diligence before proceeding.

Conclusion

Private settlements provide a bespoke, efficient, and confidential approach to property transactions, making them an attractive option in many situations. Whether dealing with probate properties, seller-financed deals, or urgent sales, private settlements can yield favourable outcomes for both buyers and sellers. However, it is crucial to navigate these transactions carefully, ensuring fair terms and thorough due diligence.

Acquiring Agricultural Land for Leasing: A Win-Win Proposition for Investors & Farmers

by | Sep 14, 2023 | Agricultural Land, Property Market Advisory Series, Real Estate Leasing, Real Estate Market Intelligence, Writer's Commentaries | 0 comments

  • Agricultural Land for Leasing: An Introduction

  • Income Diversification & Food Security: Who Benefits from Leasing Agricultural Land?

  • Acquisition of Agricultural Land for Leasing: Why Has This Become Trendy with Investors?

  • The Market: Who is Acquiring Agricultural Land for Leasing? Why?

  • Six Steps to Leverage the Acquisition of Agricultural Land for Leasing

  • Step # 1: Set a Budget and Define Your Investment Goals

      • Step # 2: Research the Market and Engage a Real Estate Agent

      • Step # 3: Evaluate Land Quality and Gain an Understanding of Zoning and Regulations

      • Step # 4: Infrastructure and Access to Market Considerations

      • Step # 5: Secure Financing, Negotiate and Purchase the Land

      • Step # 6: Engage a Property Manager to Secure and Manage Your Leasing Business

  • Key Takeaways

Introduction

Did you know that the leasing of agricultural land sustains a wide variety of commercial and large-scale agricultural production activities in Kenya? From pineapple farming to wheat farming, pastoral farming to agroforestry, the cultivation of biogenic feedstock and horticultural farming, the leasing of agricultural land is widely practiced and accepted in sustaining food production across several agricultural value chains.

Income Diversification & Food Security: Who Benefits from Leasing Agricultural Land?

Leasing Agricultural Land is a common practice that allows farmers and landowners to enter into mutually beneficial and strategic agreements for the use of land for agricultural purposes. On the one hand, landowners collect an income through the rental charged (earning passive income), while farmers, on the other hand, who may not otherwise be able to afford to purchase the land, can work the land and earn an income from farming activities (an active form of income generation)

Because Kenya is a nation of farmers (including “phone farmers” and “wanna-be farmers”), there is a widely held view that participating in the farming economy is the preserve of those who plant crops, rear animals and otherwise directly participate in farming as producers. This is a somewhat dim view because in this same nation, the producers, the ones who assume the greatest risk in the entire value chain, across almost all agricultural value chains, are the least rewarded for their effort.

Leasing Agricultural Land, therefore, is a win-win proposition. It allows the farmer to reduce risk by guaranteeing the landowner who assumes some of that risk a decent return on their investment. The landowner doesn’t have to engage in production to benefit from owning the land. Simultaneously, the farmer can sink in their capital towards production with greater optimization and can therefore achieve greater results.

Acquisition of Agricultural Land for Leasing: Why Has This Become Trendy with Investors?

In recent times (this is 2023!), spurred by the profound economic disruption (job losses, closure of businesses and more) that resulted from the COVID-19 pandemic, which has been further exacerbated by both the local and global economic downturn, there has been a growing trend among investors in Kenya who are increasingly looking for opportunities to diversify their income portfolios and improve their cash flows. Specifically, opportunities that can create passive income streams, even in real estate.

As the effects of a cash crunch, skyrocketing inflation, depreciation of the local currency and a host of other adverse economic conditions begin to bite, many investors who erstwhile preferred to buy land speculatively are increasingly acquiring agricultural land that can be leased out to generate an income without necessarily engaging in the laborious effort of producing food or rearing animals from the land. In any event, they are not individually or collectively farmers themselves. However, possessing neither the capacity, interest, nor preference to commit their time or resources in the pursuit of farming activities does not limit their ability to derive benefits from farming ecosystems – if not as farmers, then as investors. And, farmers do not always possess the capital to acquire land anyway!

They are instead choosing to create or connect with farming communities and even corporate entities engaged in contract farming, either in the area of horticulture or animal husbandry, to supply the land that is fit for those purposes on a contractual basis (through leasing).

The Market: Who is Acquiring Agricultural Land for Leasing? Why?

This opportunity is especially being pursued by foreigners from the Middle East, Asia Europe and Kenyans living in the diaspora. By finding land that is ideal for animal husbandry and horticultural production these investors are acquiring land that they can lease out for agricultural production and then working with farmers to earn an income and even produce food for export into their own economies.

In some instances, rather than investing in the land for farming per se, they are instead choosing to invest in enhancing the agricultural production ecosystems where they lease land. They are also choosing to partner with contract farmers to produce food for export into their countries, controlling end-to-end the production hubs all while creating access to their own markets. On a larger scale, this investment and cooperation is also happening at the level of national governments.

While the goal is primarily the pursuit of food security in their home countries (producing food for export to their home countries), they are also increasingly seeking opportunities in newer fields, especially in the production of crops for renewable energy.

This is a double-pronged strategy that is also being aggressively pursued in light of climate change, which is adversely affecting food and energy supply chains globally. Africa, at large, is one of the region’s most at risk and most susceptible to the effects of climate change.

Six Steps to Leverage the Acquisition of Agricultural Land for Leasing?

Can one feasibly benefit from acquiring land that can be leased out for agricultural purposes? The answer is obviously yes. And that benefit can transcend even the benefit to the farmer if one takes the time to understand how to engage in the leasing business.

It isn’t risk-free.

But given the wildly popular alternative – acquiring land for the speculative consideration of its capital growth in the future – the productive use of land not only guarantees an income nonetheless. In other words, both income and capital gains can be realized if one invests strategically, and understands the needs of their target farmers well enough to provide solutions that they require in order to sustain the business. Leasing agricultural land provides both income and sustained capital growth, optimizing the value of the asset.

Investing in agricultural land and leasing it out to farmers can be a rewarding venture, but it requires careful planning and consideration. Here are the steps to follow and considerations to keep in mind:

Step 1: Set a Budget and Define Your Investment Goals:

Start by making a decision on how much you’re willing to invest. Consider not only the cost of the land but also potential additional expenses like legal fees, taxes, utilities, and maintenance. Define your investment objectives clearly, such as the potential for long-term appreciation, lease income (return on investment), or a combination of both.

Step 2: Research the Market and Engage a Real Estate Agent

Identify regions or areas with a strong demand for agricultural land and the agronomic practices most common to these areas. This will help you identify prospective farmer groups to draw your lessees from. Factors to consider include availability of water, climate, soil quality, proximity to markets, and local farming practices. Thereafter, work with a real estate agent(s) who specializes in agricultural properties. They can help you find suitable land based on your criteria and negotiate the purchase.

The research will also help you determine critical success factors, such as the demand for agricultural land for lease in an area, the potential volume of lessees (market size and depth), the competitiveness of leasing rates, potential risks and costs, the potential returns on investment, and prospective capital gains accruing from the appreciation in the value of the land. The goal of the market research is to ensure that the leasing business will be financially viable and sustainable.

Step 3: Evaluate Land Quality and Gain an Understanding of Zoning and Regulations

What is the land good for? This can be done through an assessment of soil quality, water availability, and land topography. These factors significantly affect the land’s agricultural productivity. Some agricultural land is better suited to activities such as animal husbandry, say due to the natural occurrence of vegetation and shrubland ideal for rearing animals. For long-term arrangements, would the purchase be ideal for the growth of say biogenic feedstock rather than horticultural production? Be aware of local zoning laws and regulations that might affect your ability to lease the land for farming. Some areas may have restrictions on land use. If the capital outlay on the land will be significant, it would be ideal to arrange for soil testing to determine its fertility and whether it’s suitable for the types of crops or livestock you intend to lease the land for. If there are no natural sources of water or even utility service providers, arrangements may be required for the provisioning of water. What are the nearest sources and can water be tapped from there? If not, what would it cost to, for example, sink a borehole?  A hydrogeological survey can uncover relevant information on this subject.

Step 4: Infrastructure and Access to Market Considerations

Evaluate the availability of infrastructure like roads, utilities, and access to markets. Adequate infrastructure can make the land more appealing to farmers.

Step 5: Secure Financing, Negotiate and Purchase the Land

Arrange for external financing if needed, either through a mortgage, bank loan, or other financing options. Ensure you have a sound financial plan then proceed to identify a suitable property, and negotiate the purchase price and terms with the seller. Work with a lawyer to ensure all legal aspects are in order.

Step 6: Engage a Property Manager to Secure and Manage Your Leasing Business

You could always choose to manage the property yourself, but a property manager will come with the advantage of ensuring consistent rentals and ensuring that the land is always under lease. A property management firm which specializes in leasing land, especially agricultural land, is more likely to have a steady source of potential clients within its networks so that there are no overlaps in time between the exit of one lessee and the subsequent ones. They will also take responsibility for ensuring that the lease agreements are airtight and function to the requirements of the landowner, their client.

Conclusion

Investing in agricultural land and leasing it to farmers can be a profitable and sustainable investment. It is essential to undertake thorough research, understand the local agricultural landscape, and establish transparent and mutually beneficial relationships with your tenant farmers.

Consulting with agricultural experts or local agricultural extension offices can provide valuable insights into regional farming needs and practices.

In summary, investing in land that is prime for leasing can be a valuable opportunity for investors. The market research should be designed to ensure that the investment is sustainable and will yield an acceptable return on investment over its lifetime.

Why Off‑Plan Schemes Still Reign Supreme in Kenya’s Property Market

by | Aug 8, 2018 | Off-Plan Investing Series, Property Market Advisory Series, Real Estate Market Intelligence | 0 comments

  • Understanding Off-Plan Schemes: A Path to Homeownership

  • Why Off-Plan Schemes Are Popular with Property Developers

  • A Deeper Look: Do Buyers Truly Benefit from Off-Plan Schemes?

  • The Appeal of Off-Plan Schemes for Homebuyers and Investors

  • My Take: Why the Risks of Off-Plan Schemes Often Outweigh the Benefits for Retail Buyers

  • Unpopular Opinion: Off-Plan Schemes? Go with the Chinese

  • Navigating the Risks: What Buyers Should Know

  • Final Thoughts: Can Off-Plan Schemes Still Be Trusted?

Off-plan Schemes: A Developer’s Favourite Tune

Off-plan schemes are to property developers what music is to the soul! If you put any number of developers in a room to discuss off-plan real estate schemes, the consensus will be that they are the next best thing to sliced bread. And homebuyers and property investors are bound to concur.

Understanding Off-plan Schemes

Off-plan schemes are typically arrangements in which a property buyer or investor contracts a developer for the acquisition of a property that has yet to be constructed.

The buyer begins payment before and during construction, with the expectation that by the time construction is completed, the full purchase price will have been settled.

These schemes are often used for residential or commercial developments—estates, gated communities, or apartment blocks—where the properties are sold in phases.

Early adopters are rewarded with lower prices than later buyers, essentially receiving a discount for taking on the perceived higher risk of investing in a conceptual project.

Why Developers Love Off-plan Schemes

For developers, off-plan schemes are more than just a financing method—they’re a strategic play. They enable developers to demonstrate market interest to financiers and use buyer deposits to prove the project’s viability.

With enough buyers on board early, the project becomes “bankable.”

Executed well, an off-plan acquisition can yield immediate equity for the buyer on handover, higher than if the buyer had purchased at completion. But the success hinges entirely on the developer’s ability to deliver both quality and timeliness.

The Hidden Risks in Off-plan Schemes

While the upside appears enticing, buyers need to understand that off-plan schemes are essentially just unregulated financial tools that give developers access to cost-free, risk-free capital.

  • Unregulated: Developers aren’t required to float conventional financial instruments or comply with oversight that other capital-raising sectors are required to meet.

  • Cost-free: Deposits made by buyers are interest-free and the “discounts” are defined by the developer—not the market. When the project experiences an overrun on delivery, for example, the homebuyer will still have to finance their accommodation elsewhere.

  • Risk-free (to the developer): All financial risk rests with the buyer or lender, giving developers maximum upside with minimal exposure.

While developers argue that buyers earn their reward through discounts and equity, it is more accurate to say that the buyer is rewarded by the market, not the developer. The market acknowledges the buyer’s risk with capital gains, not the developer’s goodwill.

So, Why are Off-plan Schemes so Popular with Buyers

Off-plan schemes are also incredibly appealing to homebuyers and small-scale investors, especially those in the informal sector who struggle to qualify for mortgages. Compared to mortgage financing, off-plan schemes offer:

  • Flexible payment terms (bulk payments over time)

  • Easier access for self-employed individuals

  • Lower entry prices for early adopters

The alternative—mortgages—remains a complex, mistrusted option, plagued by high interest rates and tedious approval processes.

For many, off-plan is simply the more achievable route to homeownership.

My Take: Who Really Benefits?

Where the Real Power Lies

Despite their popularity, the reality is that retail buyers often shoulder the greatest risk in off-plan schemes. While these schemes appear inclusive, the true benefits accrue to wholesale buyers—institutional investors or high-net-worth individuals—who can negotiate for:

  • Better pricing (due to volume discounts)

  • Customised payment terms

  • Influence over project timelines and design elements

These buyers possess leverage. Retail buyers, by contrast, sign standardised contracts with limited negotiation room and little recourse if things go wrong.

In my view, developers benefit the most, followed by bulk buyers. Retail buyers are often enticed by the dream of early equity but bear the brunt of execution risk.

    Unpopular Opinion: Go With the Chinese

    This may be a controversial opinion, but I must confess a bias towards non-indigenous developers, particularly Chinese firms.

    On average, these developers have demonstrated exceptional project management discipline. In my observation, they tend to:

    • Deliver within the promised timeline
    • Offer more flexible terms with the ability to customize payment plans
    • Stay within budget
    • Maintain better structural and architectural standards

    I am in no way suggesting that all local developers are incapable or that all Chinese firms are perfect. But my observation is that these firms have “cracked a nut” and are far more reliable for the enterprise of off-plan schemes, with a history of timely completions in comparisson to local firms.

    Read into this what you will.

    That said, buyers must always conduct their due diligence, irrespective of the developer’s origin.

    Conclusion: Proceed with Caution, Not Fear

    Despite their flaws, off-plan schemes are here to stay. They fill a vital gap in Kenya’s property market, especially for buyers locked out of traditional financing. But they require caution.

    Before entering into any off-plan agreement:

    • Research the developer’s track record
    • Consult professionals (lawyers, architects, quantity surveyors)
    • Cross-check the reputation of the developer from their professional associations and the reputations of their leadership, in particular any past directorships in other property development firms.

    Regulation needs to catch up with the realities of off-plan financing. Until then, buyers must bear the burden of risk. But with insight and prudence, off-plan schemes can still be a viable path to homeownership, just not one to be walked blindly.

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