Real estate is a lucrative investment when executed right. Kenya’s population is steadily growing and with this comes the need for housing, commercial spaces, and more agricultural land. Investing in real estate provides unique benefits that other investments fail short of, including consistent value appreciation and inflation hedging.
Below we look at five reasons why real estate is a great investment in Kenya and how to start your land ownership journey with Pettmall Shelters.
- There Are Multiple Avenues to Earn Through Real Estate
Other types of investments, such as stocks and bonds, have a single path to building wealth. You invest money in equity shares or debt instruments and expect a return at the end of a certain period, depending on the company’s performance or interest rates.
Real estate, on the other hand, is a multi-dimensional investment. There are multiple ways you can earn through real estate investments in Kenya, including rental income, selling after appreciation, flipping, and Real Estate Investment Trusts (REITs).
Real estate assets are also commonly used as leverage to borrow money and expand wealth. Whether you’re a beginner uncertain of how much you need to invest in real estate or a veteran investor, real estate has options for you.
- High Returns From Real Estate’s Consistent Appreciation in Value
Real estate tends to appreciate in value over time and rarely experiences long-term depreciation.
Land is a finite resource. However, the country’s population is constantly growing, especially in urban areas and emerging towns. A UN-Habitat report projects that half of the Kenyan population will be living in urban areas by 2030 should the current urbanization rates persist. This translates to an increased demand for residential housing and commercial real estate for business growth.
As the population grows, so does the need for improved infrastructure such as roads and electricity connection. This infrastructural development further attracts more people, raising real estate prices.
Kikuyu town, for example, changed from a “dying town” to one of the fastest-growing areas in the Nairobi Metropolitan after the construction of the Southern Bypass Highway.
- Inflation Rarely Hits Real Estate Investments
Real estate is inflation-resistant. A study on the Nairobi real estate market found that inflation positively and significantly affects property prices. High inflation causes an increase in the price of commodities, including land and construction material. As a result, property value and rental prices go up, shielding real estate investors from losses that come after the economic decline.
With the volatile economic climate that the country experiences sometimes, investing in real estate in Kenya is an ideal option to hedge your wealth against inflation.
- Real Estate Diversifies Your Wealth Portfolio for Risk Management
A wise investor diversifies their portfolio to include both high and low-risk assets. While high-risk investments, such as stocks and shares, are likely to bring high yields, their unpredictability can negatively impact your real estate returns, especially if you’re just beginning. Real estate investing in Kenya is a great way to diversify and reduce portfolio risk.
Besides hedging against inflation, the revenue from real estate is also more stable and consistent compared to other types of investments.
- Real Estate Investments Qualify for Certain Tax Reliefs
While real estate comes with its own set of taxes, investors also receive certain reliefs that significantly improve net returns and support long-term wealth creation.
In Kenya, rental income from commercial and residential real estate is taxed on the net amount. This means you get to deduct expenses from the taxable amount, reducing your overall tax liability. Deductible expenses include management costs, mortgage interest, insurance premiums, and legal fees.
The capital gains tax is also lower than income tax on business profits and allows certain deductions as well. Income from REITs are also taxed at a withholding rate (5%) which is lower than standard income tax.
Invest in Real Estate With Pettmall Shelters
Land, when purchased strategically and through the due process, is a smart real estate investment. You can develop it then sell, wait for gradual value appreciation, build rental property, or preserve it for your retirement home.
Pettmall Shelters has plots for sale in prime locations, such as Kikuyu, Nachu, Lusigetti, and Thigio. These emerging towns, all within the Nairobi outskirts, are opening up due to infrastructural development and urbanization.
Schedule a free site visit with us to view our ongoing projects and learn more about the benefits of investing in real estate.
