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Micro-Mortgage 101

What is Micro-Mortgage?
Micro-mortgages are defined as “housing loans of long duration (generally ten years or more) that exhibit all characteristics of traditional mortgage loans (long repayment period, house as collateral for the loan, ability to foreclose and sell the house in case of default) and are small enough that they can be afforded by poor and very poor households”. The term is often wrongly used interchangeably with HMF, although from the definition above, it is clearly not HMF. But precisely what it is can also be unclear, as a brief look at products on the continent will show.

UGAFODE, a microfinance bank in Uganda for example started off with HMF lending, but according to them, they then proceeded, to offer “micro-mortgages” because the HMF loans offered were not large enough to purchase land, or erect buildings for commercial and larger residential houses. Its micro-mortgage ranges from US 1,200 – 10,000 as opposed to its HMF loans which average US$ 105. The term of the micro-mortgage can be surprisingly short, as little as only 36 months, very similar to HMF. Real People across the border in Kenya also a micro-financier offers a micro-mortgage for up to 9 years for “home construction”, basically development of a home from ground up. Loan amounts range from US$ 1,845 – 46,125.

Housing Finance Kenya, a more traditional mortgage bank similarly has a product of a relatively short period of time, 5 years, for purchase of a residential plot. Besides this relatively short period however, it is very much a mortgage, requiring monthly salary deductions, land as collateral, property life insurance and so on. The same company also has an interesting product whereby plot owners choose from 50 different plans offered by the bank, obtain finance, and then let the bank project manage construction of the house from scratch to delivery within 3-9 months.

This innovation presumably bridges the problem of poor market supply, but does not detract from the fact that the ensuing loan is a mortgage with amounts varying from US$ 18,465 – 312,000. KCB in the same country has interestingly a “group microfinance loan” targeting savings groups. It however uses monthly salary deductions and land title as collateral, and is also very mortgage-like. Equity Bank in Tanzania has a 10 year individual mortgage loan for house or plot purchase for salaried individuals. In Zambia, Cavmont Bank has a mortgage for individuals for 10 years.

From this, it is clear that traditional mortgages are being redesigned constantly to create greater affordability, and what is emerging is an interesting array of products with different adaptations and innovations. The product that results from this re-design is then sometimes, but not always called a micro-mortgage.

Sometimes a loan for a shorter period is called a micro-mortgage, for example the UGAFODE micro-mortgage for 36 months. Yet, Housing Finance Kenya has a equally short 5 year loan, this time called a mortgage. Loan size and the target of the loan is sometimes used to distinguish them, but again, the distinction is not very clear. Some micro-mortgages make reference to targeting affordability by “poor and very poor households”.

However, the loan, in this case for US$ 1,200, may not be for the poor, at least not on this continent. In fact, the difference and distinction between mortgages and micro mortgages is blurred when mortgages are so diverse and may not be that useful. The much more important and distinguishable product is HMF.

Not only does is serve lower income people, with much smaller loans but also, and very importantly the lending methodology is very different as formal title as collateral is not essential as it is in both type of mortagages. Rather, other forms of collateral such as group peer pressure are used. There lies the important difference.

What you need to know about the Kenya banks’ reference rate (KBRR)

The Central Bank of Kenya (CBK) has announced the first Kenya Banks’ Reference Rate (KBRR). The new reference rate replaces the Base Lending Rate, which commercial banks used to price their products. The rate is computed by CBK based on an average of the Central Bank Rate (CBR) and a 2-month moving average of the 91-Day Treasury Bill Rate.

Following the 8th July 2014 Monetary Policy Committee meeting during which the CBR was held at 8.50 percent, the initial KBRR has been set at 9.13 percent. The effective date is 8th July.Therefore all new loans issued by commercial banks should be priced on the 9.13 percent KBRR.

The KBRR is announced by CBK through Monetary Policy Committee Press Release and operationalised via CBK Banking Circular. It is expected that the announcements will be made by CBK every 6 months (or more frequently depending on market conditions).

What is the KBRR and how is it different from the Annual Percentage Rate (APR)?
Previously, banks used to price their loans using a Base Rate. The formula for calculating the Base Rate varied from bank to bank. Central Bank of Kenya has now prescribed a common Reference Rate known as the Kenya Banks Reference Rate or KBRR.

KBRR factors in CBK’s monetary policy direction (based on the Central Bank Rate) and the risk free rate in the market, which is the 91-Day Treasury Bill rate.

For further pricing transparency, members of the Kenya Bankers Association in 2012 voluntarily adopted the Annual Percentage Rate or APR pricing model. APR is the numerical representation of the Total Cost of Credit. The APR implementation was undertaken in 2013 with the effective date taking place on 1st July 2014.

What is the Total Cost of Credit?
The “Total Cost of Credit” or TCC will include the bank interest rate based on the KBRR plus a premium (or the “k”) that covers the banks’ Cost of Funds, Margin and Risk. Third Party Costs directly associated with the loan are also covered in the TCC, these include legal fees, insurance, valuation, and government levies. The TCC, including estimates for third party costs, should be provided to all loan applicants prior to contract signing.

Why is APR the Most Transparent Cost of Credit Disclosure?
Because banks will use the TCC model developed by Kenya Bankers Association (KBR) to calculate the APR, borrowers are empowered to compare loan products on a like for like basis; and therefore make more informed decisions on all the components of the loan (interest rate plus all charges and third party costs).

What is APR and will it make loans cheaper?
There are various costs associated with a loan. To better determine the total cost, a prescribed formula should be used to compute the various elements into a numeric representation (a percentage number). When this percentage number is factored over a 12 month period, it is called the Annual Percentage Rate (APR).

In most countries APR is mandated by law. But in Kenya, the banking industry has proactively adopted the APR model in conjunction with the CBK’s requirement that banks provide customers with the Total Cost of Credit (TCC) and Loan Repayment Schedule.

While the APR and TCC disclosures do not directly have an effect on the cost of credit, customers will be empowered to shop around for the loan products that meet their needs. The enhanced transparency will also stimulate competition within the banking industry thus contributing to more competitive interest rates for customers with a good credit track record.

Which other initiatives are banks working on to address high interest rates?
The banking industry in collaboration with Central Bank is spearheading a number of interventions to enhance credit access. These initiatives, which are at different stages of implementation, include: the Credit Information Sharing initiative which will enable banks to price their loan products based on individual customers’ risk profile; and development of a Reference Rate upon which banks will replace the Base Rate and serve as a standardized reference rate for all banks.

Through the Cost of Credit Committee Chaired by National Treasury, KBA has also proposed several other measures meant to address the inefficiencies that contribute to higher costs within the financial services industry, including reforms within the Lands and Companies Registries.

It is important to note that the high interest rate regime is not permanent; once market stability is attained, rates trend downwards, as we have seen in the recent past. A good signal that the market is indeed responding to the decline in interest rates is the increased uptake in credit during 2013 and First Quarter 2014 (as reported by the Central Bank).

Our address:
The Mortgages & Investment Department
Prittworld Properties & Mortgages Limited
Mountain Mall,2nd Floor suite C21
+254 722 721 525 / +254 739 256 892

4 reasons why you should invest in Diaspora Mortgages

Diaspora mortgages Investment

Opportunities in place with diaspora community

The opportunities in place are many and needs the financial institution to directly engage with the diaspora community to understand this opportunities.
Prittworld Properties & Mortgages Limited is a mortgage house with excellent and customized products targeting the diaspora community wishing to invest back in home either through construction of their dream home or buying either land or a complete house.

Our Scope of Engagement to the diaspora clients

We provide the following to our diaspora clients:
1) Real estate advisory services
We advise our clients on where to invest depending on their investment objectives and their investment amount.

2) Home Construction
Prittworld Properties & Mortgages Limited through its development arm-Prince Construction Limited, provides a full transformation process on your land from a bare land to a residential home. We do everything from design stage all through to finance arrangements to construction and handover with a complete landscaped garden with all your likes of fauna and flora.

3) Home acquisition process
We take the whole process of the home acquisition from preparing the offer letter, carrying out the due diligence, conveyance process including processing the title document upon paying the required fees and statutory charges. Prittworld Properties & Mortgages Limited is a one-stop shop.

4) Feasibility Studies & market intelligence surveys
For those wishing to invest to earn a Return on Investment (RoI), we provide to them a comprehensive market survey an assist them in making a fully informed marketing decision.

Kenya Diaspora Business Opportunities, challenges, risks & Mitigations

Kenyans in the diaspora are continuously increasing as more Kenyans are moving abroad either for search of greener pastures or for furthering their education.

According to the data at Ministry of Foreign Affairs, the number of Kenyans in diaspora is in excess of 2.5 million with Kenyans both in other African states as well as overseas. The Foreign Direct Investment (FDI) remittances in 2015 were approximately Kshs.163 billion which was a 16.5% improvement from Kshs.139 billion in 2014.

As the Kenyans increasingly relocates to the diaspora in search of academic and economic opportunities, both the Government and private institutions such as mortgage houses, banks and insurances should increasingly come up with customized and re-engineered financial products to meet the needs and preference of this community.

During the Kenyans in the diaspora investment forum which was organized by the Kenyan Government and held in Windsor in July 2015,most Kenyans expressed their dissatisfaction with the current systems put in place especially in relation to the financial remittances as they are costly and inaccessible.

The various challenges being experienced by the Kenyans in the diaspora includes:

1. Information dissemination

Most of the Kenyans in the diaspora are not privy to the information regarding the products and services which are in offer suitable for their financial needs and preference. This therefore makes it impossible for them to explore the opportunities in place for them to grow.

2. There lacks systems for the exchange of information with the diaspora community.

The diaspora community have vital information gained either through the challenges they have experienced outside their country and especially when they want to send their money home or to make an
investment. With a clear, straight forward and simple platform which they can easily learn and adopt, then they are able to explore, learn and grow.
Financial institution, mortgage houses and insurance companies then can use the information gathered to make tailor made and customized products.

3. Cost of money remittances back home still high

The cost of remitting money among the diaspora community is still high as compared to informal systems such as Hawala1. This therefore puts able and credible customers off the system.

With a simple and straight forward mechanism such as Account-Mobile phone-Transfer- Recipient account or phone. The system becomes easy and attractive to the users and is less risky.

4. Lack of formal partnerships between the Government and private players in promoting diaspora participation and confidence

The Government and private institutions should formulate a framework to promote confidence and enhance integration between the diaspora community and the amenities/products in their home country.
This will boost the general economy and remittances from the diaspora as many Kenyans in the abroad will look forward to investing in their country.

5. Differentiated products

Financial and mortgage players are supposed to generate differentiated products e.g. students seeking education should have tailor made products from the employment class.
The same should be for various Kenyans living in different parts as the challenges are not the same. We should therefore develop products depending and able to suit different people ranging on the country, age and economic status.

Risks which are likely and inherent to private institutions (banks, insurance & mortgage houses) when targeting the diaspora market

1. Reputation risk
When dealing with the diaspora community, the level of the KYC (Know Your Customer) or customer due diligence is always lower than expected due to geographical separation and at times it becomes difficult to verify some of the information presented.

Due to this, it may sometime become difficult to know whether the financial dealings relate to money received from fraudulent dealings such as terrorism or drugs and the system is just used as conduit for money laundering.

2. Default risk

This is the risk resulting for not honoring financial obligations as and when required either for the services rendered or for a loan advanced to the borrower in the diaspora.
Default risk can only be controlled by ensuring when advancing a loan, there is sufficient due diligence and the fall back position (collateral) is certain and can be converted to liquidity easily.
For the default risk to be mitigated, most of the facilities needs to be guaranteed by the employer where possible or the facility should be for purchasing properties in the home country which can be attached in the event the facility is not paid.

3. Loss of Revenue (Return on Investment)

Every product to be developed incurs a huge cost which is involved in feasibility study, public participation and in putting structures in place.
In the event that the developed product fails to meet the needs of the market, then it is rendered irrelevant in the market and therefore it not only results to loss of revenue but can result to a reputation risk.

The Role of property management in real estate growth

In the past decade the skylines of Kenya’s cities and towns have been filled with magnificent skyscrapers.

They are statements of purpose, commercial success and faith in the future. Every day we see new ones and that counts for something in the form of income generation and employment for more than 70 per cent unemployed youth. What is not so visible is the upkeep of these structures over the short and long term. Property management is meant to capture both the value of the structure in terms of longevity of its technical life, as well as a reliable regular revenue stream.

Maintenance can be done in different stages. Reginald Lee defined those stages as follows:

  • Planning and design stage – which should be based on intended use and be as maintenance free as possible. In this stage a lot of money can be saved with the proper plan and design. For this reason, the building manager and maintenance personnel should be consulted during the early stages of the building design.
  • Construction stage – in order to have maintenance during the building’s life, construction must be done with the highest quality of workmanship. As a result, expert contractors and sub-contractors should be selected for the project.
  • Maintenance stage – which is performed after the building has been constructed and occupied. It is sometimes looked at casually, much to the detriment of the investment property itself.

During an economic downturn the tendency is to reduce the financing of maintenance, yet any reduction in resources applied to building maintenance will have a visible effect on the economy. There are buildings that although generating income have little of it ploughed back to meet the required standard in terms of conditions of use and the law. There is a mismatch between the development cost and what is spent to maintain the assets. Many building owners regard maintenance as a drain on their legitimate income and mistakenly claw back budgets set aside for upkeep. A rapid growth in the building and housing stock clearly appears in the Gross Domestic Product as a part of the country’s development. More houses are being constructed. As a result, more maintenance work is required in order to cope with this type of construction.

The objectives of building maintenance are therefore:

  1. To ensure that buildings and their associated services are in a safe condition.
  2. To ensure that the buildings are fit for use and purpose.
  3. The condition of the building meets all statutory requirements.
  4. To maintain the value of the physical assets of the building stock.
  5. To carry out the work necessary to maintain the quality of the building.

Current building maintenance strategies are most likely to be budget driven. This means that maintenance is not based on actual need, but is dictated by financial priorities decided at the time or during the previous year. Although theoretically the budget should be built up as a result of estimated needs, it is almost invariably based on previous year’s figures.

Proper maintenance leads to lower depreciation costs (due to longer economic life) and consequently leads to higher profitability. At the national level, proper maintenance leads to lower expenditures on replacement, thus, allowing more expenditure on new productive investment properties.

rcok house-prittworldp

Planning your rock garden-Nyumba Smart from Prittworld Properties & Mortgages Ltd

Planning your rock garden-Nyumba Smart from Prittworld Properties & Mortgages Ltd

Classic rock gardens have visual qualities of a jewel box, with tier upon tier of gentle plants sparkling like gems among rocks. Rocks and succulent plants which can withstand harsh conditions in mountain regions characterise rock gardens.

Such gardens are gaining popularity as they add a touch of modernity to landscaping and can fit a variety of set-ups including residential, commercial and industrial.

Aside from their aesthetic value, rock gardens are easy to maintain and are in season all year round.

The basic thing in a rock garden is that the rocks are visible.

Planning a rock garden in a homestead depends on the owner’s desire but also it should be aligned with the housing structure already erected.

Design theme (Xeriscape)

The first thing is to describe to the landscaper the kind of rock garden you want for your available space.

In this case, the landscape design is one that would require little or no irrigation.

Once you are clear on the design theme you will be able to decide on what plant types to have in your garden.

This is the xeriscape design theme. It incorporates plant types that can withstand harsh conditions.

Succulent plants are a smart pick in this case.

You can add to the set-up a little bit of grass such as the fountain grass, desert roses and various varieties of sedum.

To make things interesting, select features to include in the garden from a variety of colors.
Of essence is that the rocks be visible, otherwise the garden ceases being a rock garden if it’s all covered up in plants and greenery.


Decide whether you want this garden feature in your backyard or front lawn. From there, pick its specific placement and the shape you want it to take.

Will the garden take up a large portion of your yard or will it be confined to a flower bed, where you decide to place your garden should be strategic so that it can be appreciated.

Let it sit where it can easily be seen so consider the view before establishing it there.

If you have some wiggle room, do not hesitate to include other landscaping needs such as stepping stones made of small pebbles. These stylishly fill in the space between large sections of rock.

Depending on your surroundings, you can choose local rocks, big specimen rocks, and imported rocks of special colour.

Additional features

You can add value to your rock garden by including additional features such a water feature, benches around it, garden ornaments and lighting.

Rocks and water is a natural paring. A rock garden surrounding a small pond or waterfall can be a great investment in your yard.

A water feature can accompany the rock and plants in the garden to create contrast and a blend together like they would in a natural habitat.

Sitting areas like a bench in the garden create variety. There are hundreds of bench designs specifically made for the garden from which you can choose from. Take a drive to Jamhuri Race course or along the
Ruiru-Utawala bypass and you will be spoilt for choice when it comes to benches and other garden ornaments.

Garden ornaments that may accent your garden include pots, sculptures, solar lights and gazing balls.

Lighting plays a vital role of illuminating your garden especially in the night.

Note that a well-designed rock garden evokes a sense that Mother Nature has courteously bestowed some of her best work on your land.

Project Management & Interior Designing Department,
Prittworld Properties & Mortgages Limited,

prittworld properties



As the real estate market continues to lure investors into the industry, one developer, perhaps eager to enjoy the gains of the emerging property bubble, hurriedly set up a block of apartments somewhere near the Jamhuri Showground exit, along Ngong Road.

The two-bedroom units were ready for occupation by the end of 2013, and a billboard was erected next them advertising that the houses were up for sale at Sh8.5 million.

The developer must have expected to sell the apartments fast, because of the proximity to the main road – the building is less than 20 meters from Ngong Road and is a five-minute drive to the Junction Mall.  Yet, two years down the line, and as per our independent verification, not one unit has been sold, even after the price was reduced to Sh7.5 million.

Opted to rent

Meanwhile, in what looks like a desperate move to start making some money from the investment, the proprietor has opted to rent out the houses, ostensibly as he waits for buyers. Recent confirmation showed that only one unit has been rented out.

But, what has occasioned the sluggishness in the sale of the property? Also, why is it that tenants are not queuing to rent the houses, which are going at Sh40,000 per month, when there are apartments in Nairobi charging a monthly rent of Sh300,000 and which are perennially occupied? Is it that the developer overlooked some important aspects when making the investment?

The above case is one among a growing number of real estate projects that have failed to impress the market. The projects, worth millions of shillings, are remaining unsold and unoccupied despite the fact that Nairobi suffers a housing deficit.

According to a report published last year by Kenya Property Developers Association (KPDA) and Hass Consult, a real estate firm, Nairobi requires 200,000 new housing units per year in order to keep up with the growing demand.

In 2013, only 15,000 units were released into the market, a telling factor that demands for decent housing far outweighs supply.

But how can developers ensure that their projects appeal to buyers? The trick is getting everything right at the inception stage.

Before starting a project, it is important for a developer to seek professional advice, consult widely and employ a project manager who understands the concept of your project, the target customers and the

Getting the right person for the job, he says, will ensure that the right investment is made.

For instance, the project manager will tell you if the location you are targeting is best suited for apartments or maisonettes, or a completely different type of housing.

The project manager should also help the developer design for the target market, especially after arriving at the type of development to be set up, based on the location of the land and how much the investor is looking at making.

Buyers are now more informed and have become choosy. They are no longer making purchases blindly; they are keen on details like the location and finishing.

Ripe market

The property market is ripe. But buyers no longer want developers to sell them ‘two-bedroom apartments’; instead they want specifications about the space and other amenities that accompany the buyer with a small family or no family is more likely to go for a two-bedroom apartment that has servants’ quarters than a three bedroom house without.

Developers need to be aware of these changing trends to keep up with the growing consumer needs which are at the same time changing quite rapidly. The location of the property and security are the other major factors that inform a buyer’s decision to purchase a property.

A buyer investing millions in a home will most likely settle for a place that is serene enough to raise kids and spend quality time in.

Developers also need to know that they need to get the price right because it does not look good for them when they eventually have to lower it in order to get buyers.

Marketing is an important factor when it comes to getting buyers for new property. Developers should consider listing their property in online portals and tapping into social media in order to create a buzz around their offerings.
But the most important thing to keep in mind is the fact that buyers are today more discerning and will make sure that they are getting value for their money because they have a wide choice today.

tax waiver

Rental income tax waiver a juicy deal for house owners

Rental income tax waiver a juicy deal for house owners

The wave of economic difficulties facing many governments throughout the world has seen an increasing number invest huge amounts of resources and effort on tax compliance and information sharing.

Many countries are offering tax amnesty to citizens who disclose unpaid taxes on investments as a means of getting them into the tax net.

Normally, tax amnesties allow taxpayers to come clean on potentially dubious tax matters. In return taxpayers receive a reduction in the harsh penalties that would have applied had the mischief been discovered during an investigation by the authorities. Harsh penalties include late payment and late filing and in some cases, criminal conviction.

Locally, the Kenya Revenue Authority (KRA) has introduced a rental income amnesty for landlords who have not been paying taxes on the rental income.

The rental income tax amnesty came after the KRA realized that landlords were not willing to comply with rental income tax due to the fear of being charged huge backlog taxes after years of non-compliance. The amnesty is aimed at bringing on board approximately 20,000 new landlords expected to pay in at least Sh3 billion in revenue.

The landlords appealed to the government to grant them an amnesty on the back taxes and to simplify the tax in a bid to reduce the cost of compliance.

The government heeded to their pleas and granted an amnesty that runs from  July 1, 2015 to  June 30, 2016. The tax rate was also reduced to 10 per cent of gross rent for landlords earning Sh10 million and below effective January 1, 2016.

The tax amnesty targets individual landlords, including tenants who sublet their servant’s quarters, deceased landlords whose compliance duty now lies with estate administrators and legal representatives as well as Kenyans living in the diaspora who earn rental income in Kenya.

The situation is quite different for individuals whose properties are registered under a company. They are eligible for the amnesty as it only applies to individuals.

Individual landlords who have received KRA notice asking them to pay taxes are also ineligible for the amnesty.

Why take up the amnesty?

For those who will heed the call and apply for the amnesty, there is a whole range of benefits that will accrue. Individuals, who take up the tax amnesty will get 100 per cent amnesty on principal tax for 2013 and prior years, effectively pay in the principal tax only for 2014 and 2015 with a 100 per cent waiver on   interest and penalties.

Secondly, effective January 1, 2016 landlords will enjoy a simplified and reduced tax rate of 10 per cent of gross rental income.

Thirdly, once a tax payer is compliant she is issued with a Tax Amnesty Certificate that ensures they will not be subjected to further compliance checks for the years 2013 and prior, 2014 and 2015.

Where expenditure records cannot be supported or are unavailable, landlords will enjoy a deduction of 40 per cent of the gross rental income as expenditure and in case the landlord is unable to pay the tax in lump sum they will be allowed to pay in installments till end of June 2016.

Cheaper to comply

The danger is that in the event a landlord fails to fully disclose tax due or simply evades paying the tax and KRA has evidence of such, the law empowers the taxman to take punitive measure, including determining tax due for seven years, issuing agency notices to banks and third parties to recover tax (basically the rent collected from the landlord’s property is channeled to KRA by tenants and bank), placing of caveats and charges at the Ministry of Land, which means the property owner cannot sell it and in worst case scenarios, auctioning the property to recover the taxes.

In case you thought that you can hide from the tax man, think twice. Through collaboration with government and private sector institutions, the KRA is able to get every individual’s detailed financial data from banks, mobile money transfers and even tell which property one has bought and where one lives.

It is basically easier and cheaper to comply with the tax than evade.




“You can go very wrong with investing in real estate in Kenya, you can lose all your savings by buying ‘air’ in the name of land.”

People being defrauded almost daily have become one of the most humbling challenges relating to purchase and development of property in Kenya today.

But why is it that investing in property is fast turning out to be a great source of pain for many instead of joy and fulfillment? Who is to blame? The investor? The crooks, the government?

More importantly, though, is: What is the solution? True, fraudsters are roaming our cities and towns day and night, looking for whom to fleece next millions of shillings.

However, you do not have to be their next victim.

All you need to do is to understand all the basics that you need to know before you get started in real investment.

This involves knowing the law relating to real estate in Kenya, the logic that you should apply before making a purchase and the math that you need to do to make informed judgment.

There are ten things that you should look out for when buying a property. These are things that people overlook when buying a house, whether through mortgage or by cash, but which end up being used by fraudsters against potential property owners.

1. Verify existence

As a real estate investor, one cardinal rule you must never ignore is conducting due diligence.
Take your time to investigate and understand the deal you are getting yourself into.

To do this well, you must first make sure that you have completely detached your emotions from the deal (because fraudsters almost always play on buyers’ emotions).

Make sure you are sober so that you are not carried away by the feeling that you are only a cheque away from becoming Kenya’s latest property owner.

Verification is important because many Kenyans have bought phantom property only to realise it when it is too late.

Make sure that the property you are being sold to exist both on paper and on the ground. A valuer, an estate agent or a surveyor should help you to positively identify the property through the use of relevant documents such as survey/deed plans and registry index maps.

2. Establish ownership

It is possible for someone who wants to defraud you to show you a property that belongs to someone else.

For instance, a while back, a young man looking for a house to rent in 2010 saw an advert in a local daily for a two-bedroom house in Kilimani and liked it.

After talking to the “letting agent” on the telephone number provided, they met at a city hotel and signed a lease agreement, which came ready with the “landlord’s” signature.

When the “agent” finally took him to see the house, George could not believe what he saw: a relatively new but imposing two-bedroom apartment unit with very spacious rooms.

The floor and wall finishing were any house-hunter’s dream. Workers on site doing final touches on the paintwork told him that it would be ready for occupation in two days.

The next morning, he asked his girlfriend to accompany him and see the new house and select the best curtains before they could move in. To his surprise, he found someone else moving in the house.

When he inquired, he was told the house belonged to someone else and that the owner had never asked anyone to let it on his behalf.

Lesson: Even if the property exists, establish who the true owner is. You do this through an official search. (Don’t do a personal search, which is usually given through word of mouth).

An official search will show the name and address of the owner and a note of any inhibition, caution or restriction affecting his right of disposition. These restrictions or cautions are usually referred to as caveats.

The search will also give a brief description of the property, stating clearly whether it is freehold or leasehold. It will also note all the encumbrances or burdens on the property such as bank loans or mortgages.

At the end of it all, you are issued with an official search certificate. Remember you will have asked for the property’s title deed to enable you carry out the search.

3. Know the history

A title from a bad mother title (an illegally acquired title) is invariably fake.

In Syokimau, for instance, the sub-titles given to the subsequent property owners could not stand because the mother title belonged to the Kenya Airports Authority, which did not sell the land to the victims.

Also make sure the land or the property you are buying does not fall within a road reserve or a riparian area. Even if you are buying an apartment unit, you still need to ensure the mother or original title is genuine.

4. Don’t leave all to the lawyer

Most investors leave all the verification of the authenticity of the title and everything else in the process of buying a house to the lawyer.

A lawyer “cannot” read a map or do a structural survey of a building. If the lawyer doesn’t consult the necessary professionals, you might end up buying a collapsing building or a plot on a road reserve.

5. Use professionals

If you are buying land, get a reputable land surveyor. If you are buying a house, seek the services of a qualified and registered estate agent.

Never say it is expensive to hire an expert if you truly value the millions of shillings you are ready to pour into your dream property.

Never deal with a quack, in this case, anyone who is not registered by the relevant authorities or associations.

If you buy a fake plot after being advised in writing by a registered valuer, you can sue for professional negligence and get compensated by the valuer’s insurance company. Banks know this, which is why they insist on a valuation report before they finance you to buy a property.

6. Abide by regulations

Each property has a specific use into which it can be put. In Kenya, a property can be residential, commercial, institutional or industrial.

The use must be physically possible, legally permissible, and financially feasible and that which will give the highest returns hence the concept of highest and best use.

If someone is selling you a property in the city centre, you must establish who the permitted user is. Planning regulations will clearly show you what the property should be used for.

If you are putting up a new building, make sure you get all the approvals.

7. Beware hidden costs

When negotiating for financing, the borrower should be keen to know the true cost of borrowing.
Apart from the interest rate, there are also hidden costs such as valuation fees, legal fees and loan negotiation fee among others.

When taking a mortgage, also ensure you know the implication of taking a fixed rate mortgage or a variable rate mortgage.

8. Rates clearance

Never buy a debt-ridden property. Land rates, payable to the local authority under whose jurisdiction the property falls, sometimes accumulate into millions of shillings.

If you buy such a property, you may find yourself in the same situation thousands of property owners found themselves in recently when City Hall threatened to auction their property over accumulated rates.

People seem to be buying houses and plots disregarding land rates that should be paid annually to local authorities.

At times, real estate investors assume, ignore or forget their obligation to pay land rates, which pile into huge amounts. Among these people, are those who inherit a debt-ridden property on purchase.Legally, it is important to obtain a clearance certificate from City Hall to confirm that dues pertaining to the property are settled.

Failure to obtain the certificate means the buyer inherits the accrued debt from the previous owner. A property lawyer can help one avoid such pitfalls.

9. Insist on a title deed

Under our land laws, only a title deed is recognized by the government as proof of ownership.
A share certificate cannot replace a title deed.

Land buying companies usually purchase swathes of development land on the outskirts of major towns like Nairobi, sub-divide them, and then issue buyers with share certificates as the new owners wait for their individual titles to be processed at Ardhi House.

Buyers can sometimes wait for years before getting the titles. The sub-divisions may also stall midstream due to some conditions that the owner cannot meet or even as a result of death.

If you are putting up a housing development on such land, you could end up losing money because there might not be people willing to buy the houses if you don’t have a title deed to the land. So, when buying land, let the seller give you the actual transfer documents during the transaction.

10. Structural soundness

If you are buying a completed house – whether new or old – make sure you get an expert to undertake a structural survey to ascertain that it is not falling apart.

It will cost you some money, but it is prudent that you do it. Many people do not bother to do this. But some of them start noticing cracks on the walls as soon as they occupy the house and are ultimately forced to bring it down.

If you have money you want to invest in real estate, take your and do due diligence. It will save you a lot of unnecessary heartache.

Don’t wait to buy a house, buy then wait, many Kenyans miss out on real estate investments because they waited for a perfect time “which never come”. There has never been a good time to do anything. When it comes to investments, many people give excuses.

If you want to wait and invest when the interest rates are low, where are you putting that money and will it be available when you need it? Since interest rates started skyrocketing early last year because of inflation, real estate industry sources have been saying that potential home buyers had put their buying plans on hold, opting to rent as they waited for the rates to come down.

This was the wrong approach when it came to real estate investment. She admitted that people tended to invest more when interest rates were low.

However high interest rates should not be a hindrance to anyone wanting to own a home since in the long-run, the property values appreciate over time and may be out of reach of many when the rates finally come down.

You gain more from a house that you have already bought because you can let it or even sell it later. If you are paying a mortgage even during a high interest rate regime, you, unlike a tenant, have hopes that the house will finally be yours. The right time to invest in real estate “is now”.

“If you wait, say, until next year, the same plot you wanted to buy today will have doubled in price, describing mortgage rates as speculative.'s of mortgage

Mortgage Financing @16% p.a Versus Renting

Kenya’s mortgage industry has been on the growth path and is now becoming more competitive.
Although on the on a growth path mortgage lending is still really low and as of December 2012 it stood at  3.7% as a percentage of Kenya’s GDP this compared to 70% and 50% in the US and UK respectively.  A  number of obstacles have been identified as impediments to the growth of mortgage accounts;  affordability and insufficient housing supply are among them plus a lack of understanding about mortgage among Kenyans. But still mortgage uptake is on the rise at 30% per year mainly from a growing middle class.

What is a Mortgage
A mortgage is a loan agreement between a home owner or buyer and a financier that gives the conditional right of ownership of the property to the financier as security for the loan, until the interest on the amount is fully paid. The difference between a regular loan and a mortgage is that in a regular loan there is no explicit collateral while in mortgage collateral for the loan is the house itself. If you don’t pay back the lender takes back the house; this is what is referred to as foreclosure.
A better way to look at mortgage is a financier acting as a Landlord. The financier or Mortgage lender will buy the property and then acts as a landlord. The buyer in addition to paying rent contributes monies towards purchasing the property. After making the last payment the property changes hand from the financier to the buyer.

Is a taking up a Mortgage my best option?
Buying vs. renting is a consideration people take in developed countries to buy homes via a mortgage.
Home ownership is cheaper than renting because of low interest rates and longer repayment periods; mortgage rates can be as low as 3% (fixed rate) over a 30 year period. This is done by comparing what mortgage you’ll pay on a property over a property as opposed to the rent over the same period, considering property prices and rent inflation.

Compare the costs of owning and renting; calculating the average rent and for-sale price for certain set of properties in a given area. Let’s take Kilimani for instance a 3 Bedroom apartment in the area will go for about 18 million while a rental for the same property will go for around Ksh.180, 000 per month.

Compare the costs of owning and renting; assume you get the current average mortgage rate of 16.6% on a 20-year variable rate. Using a Mortgage calculator that would translate to around Ksh. 250, 000 per month making just a 38% difference from the rent taking in consideration that rental prices are on the increase with a 12.1 % increase in 2012 alone and property prices increasing by 6.6% in the same year. Also quoted 16.6 % variable rate with the current market trend rates could go down with the growth of the economy and adjustment of the CBK lending rate.

Meaning the mortgage you will be paying will going down as time goes by. In the long run it is better to buy and mortgage the property before the prices and the rental price go up. If you take figures of a different area with a much lower real estate portfolio where rents and property prices will be much lower, you can get a more favorable outlook.

An example will be any upcoming
Gated community in Nairobi outskirts and preferably on an upcoming road reserve. For example, on a Kshs. 2,000,000 mortgage at 15 percent interest, amortized over 20 years, your monthly payment would be Kshs. 26,335.

This can be a good deal as this number can be even lower than the rent.
To manage on the overall construction cost, Prittworld Properties & Mortgages Limited has developed a product called “Nyumba Smart” to assist individual plot owners develop their own dream homes in a plot of their choice. This helps to reduce overall investment price.
Apply for our “Nyumba Smart” product through downloading the “Nyumba Smart Application Form” from our website

Mortgage financing options
Over the recent months Kenyans have been introduced to an array of difference home finance promotions.
In fact average mortgage rates fell to 16.6 per cent from 17.7 per cent three months ago. CFC Stanbic led the pack by slashing rates from 17.0 per cent to 13.5 per cent. CBA, National Bank, Housing Finance, Equity all cut their rates by 2%. Standard Chartered Bank introduced the lowest rate with a 45 day offer at 12.9% p.a. However the offer was part of a bundle with other banking products. Foreign currency mortgages are also available at much lower rates (9 to 10%).  This can be a good option if you are earning in foreign currency.

Taking a mortgage is one of the biggest financial commitments you’ll ever make. It’s important to know what these risks are and to be financially prepared for them. As much as it is predicted mortgage rates might come down there is still a potential for them to go up. If also happen to take foreign currency mortgage, be sure you are getting a regular income in the currency you are paying in. Otherwise buying foreign currency can be quite expensive in a volatile exchange rate. Also make sure to buy a home you like and one that you’ll feel comfortable in over the long term.

Research on the mortgage financing has been carried out by:
Investors Relations Unit
Prittworld Properties & Mortgages Limited
P.O Box 10405-10100
0721 292 230/0722 721 525