Real estate returns in Kenya depend on various factors, including where you invest, type of property, and the market conditions.

The average market yield for commercial office space in the Nairobi Metropolitan, for example, was 7.8% in 2024 while the returns for land sales were 4.5% within the same period. [https://cytonn.com/uploads/downloads/real-estate-markets-outlook-2025-note-vff.pdf]

If you’re already comparing properties and locations to invest in, consulting a trusted real estate partner will help you make an informed decision backed by professional advice.

How Do I Calculate Real Estate Returns?

The most basic formula to calculate real estate returns on investment is dividing the net profit by the initial cost of investment and multiplying by 100 to convert to a percentage.

(Net profit/total cost of investment) * 100 = Real estate ROI

Let’s say you buy land in an emerging town at KES 500,000, all expenses considered. Three years later, the town has developed and you sell the property at KES 700,000, all expenses considered. Your ROI would be:

ROI: (200,000/500,000) * 100 = 40%

There are other real estate ROI formulas that may apply depending on factors, such as the financing method and type of investment.

What’s Considered a Good ROI for Real Estate?

A good return on real estate investment is subjective. What one investor considers a high yield might not be the same for another.

Key factors to determine whether your real estate ROI is good include:

Investment strategy: Long-term investors expect low but steady ROI for an extended period if the property promises strong appreciation, while short-term investors focus on quick flips with higher ROIs.
Local market conditions: Fast-growing areas have higher ROI expectations compared to low-growth markets.
Financing costs: Real estate investments with high-cost financing need high yields to balance the acquisition costs while low borrowing costs have some breathing room for low steady yields.

Factors That Influence Returns on Real Estate Investments

If you’re exploring real estate investments in Kenya, you must consider how you’ll benefit and whether it makes financial sense. There are additional reasons to invest in real estate besides cashflow but ultimately, the value returned should save you money in the long run.

Location of the Property

Developed urban areas have high real estate returns due to increased demand. Satellite fast-growing towns, such as Kitengela, Kikuyu, and Athi River, may have a great ROI for long-term investments due to value appreciation.

Proximity to major amenities, such as roads and institutions, also attract high returns due to the convenience for buyers and renters. For instance, plots for sale in Kikuyu and surrounding areas significantly shot up in price after the construction of the Southern Bypass.

An Area’s Potential for Growth

A location’s potential for growth can inform you right away whether your investment will yield any returns and how long it’s likely to take. For instance, the value for property along the Nairobi Expressway’s corridor began rising after its proposal even before completion.

Nairobi’s satellite towns also promise huge growth as the city’s population expands and the demand for affordable housing increases.

Real Estate Market Conditions

Several factors can dictate the real estate market environment including:

Demographics: Areas with a young-aged population are more promising for rental housing while a senior population may be looking for retirement investments.
Political environment: An unstable political environment with harsh policies is likely to tank your revenue, while government programs, such as the Affordable Housing, can be lucrative real estate investments.
Interest rates: Low borrowing rates make home or land ownership easier, which translates to high real estate returns for investors.

Type of Real Estate Investment

Different types of real estate properties bring different yields and it’s up to you to align your investment goals.

For instance, buying land and building your residential home may save you rent money but doesn’t bring in direct cash flow. Purchasing land in an emerging town and developing rental units may initially bring low returns due to high investment costs, but become a steady source of income over time.

Explore Our Plots for Sale in Kikuyu, Kenya

As Nairobi’s population grows, so will the demand for affordable housing, especially in satellite towns.

Pettmall Shelters has plots for sale in similar locations, including Kikuyu town, Thigio, Lusigetti, and Gikambura. These are fast-growing areas with planned and existing infrastructure all which promise high returns.

Call us at +254 – 726 333 222 or book a free site visit to explore our projects.