Millennials have been labelled as ‘Generation Rent’ by economists, due their reluctance to own property. This has pushed them to pay rent for longer than previous generations – baby boomers and Generation X.
According to a study done by apartment search platform RentCafe, every person born between 1980 and 1994 paid a median rent total of Sh9.7 million in from 2009 to 2017, while older ones paid Sh9.3 million each in that eight-year period.
Generation Y, it turns out, are shy of investing in property not because they cannot afford homes, but because they prefer to rent as constructing houses in the outskirts of major towns comes with hidden costs and takes long.
This is against their impatient nature and the love of living in particular suburbs where their ego allows them to enjoy life in the fast lane, with no plan for the future.
“I love to live in the moment. I want to enjoy the best life every day. The idea of starving myself to own a piece of land in Kitengela which will cost me tens of millions to construct a home kills does not inspire me,” says 26-year old Brian Kamuti.
He parts with Sh120,000 for rent every month for a spacious two bedroom house in Kitisuru.
“It is big enough to live with a few friends. I have converted one room into an office,” says the software engineer, who has paid a rent total of Sh4.3 million in the past three years.
However, millennials cannot be blamed for their lack of investment, especially in Kenya, where the real estate sector has been muddled with inhibitive procedures that discourage them from buying land.
For Linda Okolo, who lives with her family in a rented three bedroom house in Lavington, Nairobi, and pays Sh180,000 per month, owning property is too tedious. She says there are many loopholes that can make one lose one’s money.
“It is easier to rent than pump your millions into a project that will never materialise. There are so many brokers and fraudsters waiting to pocket your money and deliver nothing,” says the 28-year old.
Though a rocky and turbulent ecosystem, it has not eroded the passion and determination from the hearts of some young Kenyans who see the joy of relieving themselves of the monthly burden of paying rent in future.
Chief executive and one of three founding directors of property firm Username Investments Limited Mr Reuben Kimani recalls the hurdles they had to go through to set up their first office in 2013 as millennials.
“We were all aged 29. We had been employed for some time so we used our savings to rent a small room in Nairobi’s CBD.
“Our dream was to help millennials own property. But at that time, the industry was unforgiving, full of greedy brokers and scammers. We weathered through the turbulence and made our first sale, and that set the rhythm for wading through other hurdles,” he told the Nation.
Kenya’s real estate industry is plagued by a web of complex corrupt cartels and a hesitant regulatory government agency. These among other factors discourage Kenya’s Generation Y from investing their money on real estate projects.
Mr Joseph Gitonga, a fellow founder and Username’s marketing director Mr says this among other generational hurdles have cemented the term ‘Generation Rent’ on the country’s youth population.
“This industry lacks proper structures. There are too many money swindlers who con innocent millennials out of their hard earned money. They take away their livelihoods without caring whether they took a loan to purchase the property or not,” he says.
This is heartbreaking, and according to him, the mesh of land fraud is so complicated that it will take a miracle to stop it. This, he says, is the bottom-line for millennials’ skepticism about investing in future property ownership.
“Agent conmanship is complicated because it has ties within the government. There is runaway bribery led by government employees who collude with brokers to facilitate illegal transactions. It is choreographed in such a way that the client comes to know of the reality 5 to 10 years later when he or she has developed the land,” the 36-year-old remarks.
He discloses that he once experienced it when a cartel sold his young company land belonging to someone who had relocated to live abroad.
“The brokers knew the owner was in the diaspora, so they colluded with a member of the family who also belongs to the cartel, to sell us the property. It became difficult to trace where the forgery happened to get all the documentation needed for purchase,” he says.
This had financial implications for his firm, which had purchased the land and sold to a client.
“It cost us double because we had to repurchase the land from the rightful owner when he came back to Kenya. We lost tens of millions but we had to protect our client and image,” he remarks, adding that government laxity has allowed this to keep happening.
Apart from being petrified by these roadblocks, people under 40 years are shy of saving part of their earnings to invest in property.
“Most of them are underemployed and struggle to save. Others are from middle-class backgrounds where they are not taught to invest. But there are those from low backgrounds who are determined to own property,” Mr Gitonga says.
He mentions the spendthrift, carefree nature of Kenyans born after 1980 as a major factor that forces them to keep paying rent.
“They want to spend their money on liabilities because they have this belief that ‘you only live once.’ They want to buy a car before owning land. They are enslaved by the feel-good mentality,” he explains.
However, Moses Muriithi, who started saving to purchase his first property while still a student at Kenyatta University and became the founder and CEO of Fanaka Real Estate knew financial discipline and focus would lead him to success.
“At my time in 2014, there was a lot of pressure from my peers against saving. They were buying cars and living large but I remained in my bed-sitter house not because I could not afford a two-bedroom house but because I was focused on what I wanted in ten years’ time,” he recalls.
He highlights low bank credit scores for the youth and lack of information as stumbling blocks but still sees other alternatives in owning property.
“Many think that you need to save millions to own land. They are unaware that saving at least Sh20,000 a month can get you a plot within a year. Another problem is that they want to own it in specific high-end areas where they cannot afford,” he says.
For Purple Dot International, a Sh1.3 billion privately owned residential, industrial and commercial real estate developer, putting smiles on faces of young investors should be the core goal for every real estate company.
Kick starting its business with construction of warehouses, the company has digressed into residential investments after realization that there exists a growing number of middle and upper class young people dreaming to be home owners and cannot afford paying for units one off.
“We opted to invest in residential homes, offering flexible payment options and at the same time availing the support of financial institutions for aspiring owners,” Jiten Kerai, General Manager, Purple Dot International told the Nation.
Since breaking ground in April 2019, the project already saw a 60 per cent sold off plan and continues to attract more investors considering its proximity to the Central Business District, Westlands, Lavington and Riverside.
“Many of our investors will tell you the story of how they bought their first units or houses – something they never thought possible. The point is to help enterprising individuals with the right information, help them invest and grow their investments. The happy expression on their faces is something I cherish most,” adds Mr Kerai.
The project, Elina Residences, consist of 66 three-bedroom apartments and four 4,200 square feet penthouse duplexes sitting on 0.7 acres of land along Mandera Road, Kileleshwa.
“My interest in the project initially wasn’t strong, it evolved into peak curiosity when I saw the growing number of young investors buying units from it. I was on board because of the honesty with which some of the units came to completion. I continue to invest for that reason,” Harshit Shah, a young investor, says.
Mr Gitonga however, says that the trend by many youths to set short-term life goals maims their urgency to start investing.
“They lack the awareness that even that developed area they want to invest was at one time just a bare piece of land. They need to know that buying land away from the city is worth investing because in ten years’ time, that place they think is underdeveloped could have tarmacked roads, electricity, rail, recreation and other public goods that will appreciate the value,” he expounds.
Mr Muriithi, whose company valuation is now more than Sh500 million advises parents to start teaching their sons and daughters about the benefits of investing in real estate from a young age.
“It is difficult to save when you earn little. I used to save part of my HELB loan to purchase my first plot. Parents should teach their children about sacrificing their hard-earned cash for a better future where they no longer pay rent,” the 31-year-old says.
Young Kenyans, Mr Kimani says, can start by investing as little as Sh30,000 per month at Username, to own a plot in two years’ time.
The Ministry of Lands has repeatedly said that all land purchase processes have been digitised, a move that was expected to attract young Kenyans to land ownership, but that has not protected the sector against fraud.
“The digital process is not comprehensive yet. Computerising the registry fully will help but we have to ensure we maintain the integrity of the system by inputting correct data.
“The system should be shielded from interference by criminals. We have witnessed instances where digital systems are compromised even by people who are supposed to protect them,” says Mr Kaburu Mwiti, CEO and founder of Kwetu Real Estate.
He says that for millennials to succeed in owning property, existing government financing such as Youth Fund and Uwezo should be made more accessible.
“The challenge of rampant fraud can be curbed by going digital. A more aggressive war on corruption will ensure the sanctity of title deeds,” he adds.
To succeed in this business, he says, persistence is key. “You have to be thorough in compliance to avoid getting into problematic deals. If customers realise you are prone to corrupt deals they will give you a wide berth. However, if your transactions and properties are clean, you will build a good name, inspire confidence and attract customers.”
In every land ownership stage of ownership, due diligence must be done, but how long does it take to own property in Kenya?
“Usually 3 to 6 months. There are 10 steps. The client must start by doing background research about the property vendor regarding the number of projects delivered and its credibility,” says Mr Kimani.