Money Talks: Land as a financial investment

Land in Kenya has always been an emotional and political asset.

Understandably so. It became emotional when the white man landed on our shores in the 18th century and took it from us. Our people were driven away from their homes, and blood was shed to claim the land back.

I suppose that we still cry freedom to this day because we are somehow still fighting that war. That we must all own land. 

There is also the political talk of ‘Who owns Kenya?’ 

This is taken in the literal sense in that the chaps who own Kenya, the ones who swing the pendulum of our political landscape, hold expansive swathes of land. They own the country because they own the land within its border.

Step away from this thinking 

As modern-day investors, we need to step away from this archaic emotional thinking and approach the investment of land with as much pragmatism as we can. 

Land is a financial asset.

Hear this from me, as well – your investment portfolio is not incomplete because you have not bought land. Holding the title deed is not the quintessential mark of an intelligent investor.

You put your money in the investment products you understand, in what satisfies your risk appetite and in what you can afford to finance. Everything else outside of that is noise you can shut your ears to.

Right.

If you are looking to buy land in Kenya as a financial investment, buy it for one of these four reasons:

1. You plan to build a home and settle there

Before 2020, most employed folks were buying land in the outskirts of the city and out of town to build their retirement homes.

A place to settle during their sunset years. They were waiting to reach 65 before they packed whatever was left of their lives into the back of a truck and moved.

All of that changed in 2020. COVID-19 made it the new normal (ha!) for just about everyone to work remotely – and not just from home, you can pretty much work from anywhere you have a laptop and a reliable Internet connection. 

Working remotely liberated the working class and cracked open the choices because the decision of where we chose to live is no longer informed by how convenient it is from our places of work.

Now we can live in the outskirts of the city and out of town while still on the payroll of employers who are based in the town. I want to say it’s a win-win, but I won’t. Although it truly is, ha-ha. 

Live in Syokimau and work for an employer in Westlands. Live in Juja while working for someone in Karen. In Naivasha for a boss in the CBD. 

And so, buy land if you plan to become a homeowner now or sometime in the foreseeable future. 

2. You are holding on to it for speculative purposes

Land as an asset appreciates over time (a car is an asset, for example, that depreciates – its value goes down as you use it/over the years). 

The value of land goes up over the years, no matter if you are using it or not. The market determines this value.

Other developmental factors – access roads, availability of electricity and water, other residential properties, a budding commercial hub, et cetera – increase the value even more. 

You could appreciate your land in your books of accounts but engage a professional valuer every five to seven years to assess it for its market value. 

The difference between the purchase price and this market value is the gain.

Say you bought a quarter acre in Kitengela in 2002 for Sh180,000. In 2021, a professional valuer values it at Sh900,000. This difference is the gain, that’s Sh720,000. 

If you sell the land to somebody else, this Sh720,000 will be your profit on the investment. 

Invest in land and hold on to it, being aware that its market value will go up, and you will sell it at some point in the future to make a profit.

3. You intend to lease it out

You can buy land and lease it out at a fee for investors to set up and run their projects. 

Let me give you an example. There are some ancestral landowners in a budding neighbourhood, such as Ruaka, who hold acres of land.

These landowners don’t want to sell it, but they don’t have the money to develop it. So what do they do? They enter a contract with folk who have money.

The contract says that they will lease the land out to you for 10 years, you engage in whatever investment project you want to engage in.

You will only pay a leasing fee (annually, bi-annually or quarterly), and after 10 years, the leasing contract will lapse, and you will give me back the land as I had given it to you.

Leasing out land is another long-term option for getting a return on your land investment.

4. You plan to put up investment projects

Instead of buying land and leasing it out for other investors to run projects, you can set up the investment projects yourself and make some money.

You can build and let out rentals (residential or commercial rentals). Or put up a greenhouse for farming.

Maybe a farm itself. Or a hotel and restaurant. A school, perhaps. 

Probably set up grounds for hire; for weddings, photoshoots and other events. Or a playground with bouncy castles, the works. Maybe even a recreational park. 

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