Diaspora Investments in Kenya’s Real Estate Part 2

Over the past five decades, millions of Kenyans have emigrated to other countries, mostly the developed countries in the west such as the United Kingdom, the United States, Canada, Australia, New Zealand and Germany among others in search for better jobs as well as living conditions. These people have proven to be a very valuable asset as they do not give up their connection to the country and their relatives after moving abroad. In fact, the Kenyan diaspora spends a lot of money in the country to support their relatives and in investing in various sectors of the Kenyan economy. For example, the diaspora remittance amounted to $4.027 billion in 2022 and provided much needed foreign exchange to the highly indebted Kenyan economy. Some of the money is spent on supporting relatives such as parents and the elderly while some is spent in investing in their relatives’ education. That said, most of the people in the diaspora prefer to invest their money in the real estate sector or by buying fertile agricultural land in the countryside. This is in spite of the fact that investing in real estate can be a daunting prospect particularly for people who are living abroad due to the uncertainty and risks associated with the prevalent fraudulent activities in the real estate sector. This article explores the reasons why the real estate sector is the preferred choice of investment by many in the Kenyan diaspora.

Growing Demand for Housing

It is no secret that Kenya has a youthful and rapidly growing population that is increasingly moving to urban areas leading to a rise in the demand for housing that is favorable for investors including the Kenyan diaspora. The transformation of Kenya into an urbanized society will provide opportunities for investments for the next five decades. As such, it is no surprise that some in the Kenyan diaspora would like to cash in on this opportunity as the growing demand means that investments in the real estate sector/residential properties are likely to yield impressive returns. In fact, this trend is not expected to die down any time soon. As private developers and the government work to improve the country’s infrastructure, the appeal for urban living will only strengthen in the future. This is because urban areas often tend to offer more and higher paying job opportunities and have better infrastructure that attract people from the rural areas. The government has also pledged to invest in affordable housing as it acknowledges that not all households have the financial resources to afford the high prices charged in the cities. By investing in affordable housing, the Kenyan diaspora knows that it is likely to reap the rewards as these communities continue to develop economically.

Long-term Capital Appreciation

Residential properties/apartments and land tend to appreciate over time, ensuring that investors can have assured value over the long term. In areas where rapid urbanization is underway, land and properties tend to see substantial increases in value as the demand rises. As such, investing in land, the housing market or the real estate sector positions the investor to capitalize on this growth trajectory for years or even decades to come. The historical data backs this strategy, showing that real estate investments usually appreciate over time especially in areas where the infrastructure is being developed. This is unlike other investments such as machinery or even wholesale and retail businesses where products can depreciate over time. By observing these market trends, it is clear that the Kenyan diaspora has recognized that the real estate sector is the most attractive for investment in the Kenyan economy. Furthermore, long-term capital appreciation is important as it naturally complements one’s rental income leading to a significant opportunity to build and accumulate wealth. As an investor benefits from the rising property value as well as consistent rental revenue, their financial health will improve over time. As such, people in the Kenyan diaspora who wish to solidify their financial futures will continue to be attracted to the real estate sector in the country.

Ease of Management

One of the biggest advantages of investing the real estate/housing sector as a member of the Kenyan diaspora is that it is relatively easy to manage from abroad. Once the construction phase is completed, apartments and houses require minimal maintenance can can easily be managed whether other is in or outside the country. This is unlike other sectors such as agriculture, wholesale and retail which require hands on management to be successful and generate consistent revenues or incomes. For example, most of the apartments especially in the middle-class areas only require one or two staff to maintain and report major incidents to the owners. This makes it easier for people in the diaspora to manage their properties especially because it is now possible to communicate through chat, audio and video calls throughout the world via the internet at very low costs. As such, many of the diaspora have preferred to invest in real estate it provides them the opportunity to earn significant revenues while working abroad. Moreover, there are many property management companies that have risen over the past few decades that manage properties on behalf of the investors thus enabling them to earn the benefits of rental incomes without having to be physically present.

Legacy and Wealth Generation for Future Generations

 The real estate sector offers members of the Kenyan diaspora an opportunity to leave a lasting legacy by establishing generational wealth. Property ownership provides a tangible inheritance for future generation by offering them a foundation of financial security in their lives. By investing in property in Kenya, investors in the diaspora have the chance to make sure that their children as well as grandchildren will have a valuable asset in the country that can continue to appreciate and act as a reliable source income for many years. In addition, beyond its financial value, investing in real estate allows the Kenyan diaspora to create a lasting family connection to their country or homeland. This investment can be very important in the strengthening of familial ties across generations. This is particularly important because most of the houses/apartments that are being built can last for over 70 years if they are well maintained. Investing in real estate also allows the diaspora to break the chain of poverty across generations and ensure that their descendants will not have to worry about descending into poverty if they lose their jobs or are unemployed.

Access to Incentives and Financing

            Successive governments in Kenya have recognized the need to attract investment from the diaspora to grow the economy and  increase the remittances which are a significant source of foreign exchange for the country. As a result, it has created incentives for financial institutions in the country to create incentives and products that are specifically designed to encourage investment by the diaspora. These financial products can include extended repayment periods, favorable mortgages as well as streamlined approval processes. This makes it easier for members of the diaspora to invest and acquire properties without the need to pay the full amount upfront. In addition, there are organizations that are specifically aimed at enabling diaspora investments and can offer attractive options such us extended repayment periods of up to 25 years. Such organizations are effective because they reduce the entry barriers for the diaspora allowing them to invest without having to go through overwhelming financial strain.

Real Estate Offers Tangibility and Stability

One of the most compelling reasons real estate is a strong investment for the diaspora is its inherent stability. Unlike cryptocurrencies, stocks or agriculture, real estate is a tangible asset that is not prone to dramatic fluctuation. Although property prices can rise or fall, real estate has historically been proven to appreciate over time thus making it less volatile than many other forms of investment. The stability provided by real estate is particularly valuable for people in the in the diaspora who want to have their wealth grow steadily. Moreover, the ownership of property provides a tangible link to one’s homeland. For a lot of people, such a connection carries an emotional significance that extends beyond financial returns, offering a sense of belonging as well as permanence.

Favorable Government Policies

Government policies that are aimed at boosting investment in the housing sector make it an attractive time for investment in real estate. Policies including subsidized interest rates for home buyers and tax incentives for property developers prove the government’s commitment to making housing more accessible for all people regardless of their financial abilities. With such incentives, the barriers to entry for potential investors, including those in the diaspora, are considered lowered thus encouraging more people to consider the housing market. In addition, the current government also has an agenda of enhancing manufacturing, providing universal healthcare, increasing agricultural production, providing affordable housing is good for the housing sector. This is because it does not only focus on providing jobs but also on enhancing the infrastructure needed for housing development. All these factors play a role in the creation of a more conducive and stable environment for investments. As such, there are many in the diaspora who are proactive in taking advantage of these government policies. In a rapidly changing and growing economy, adapting to government changes as well as policies can position one’s investments for maximum benefit.

Potential for High Returns

            There is no doubt that investing in the housing sector in Kenya can provide significant returns, particularly in developing neighborhoods in cities or towns and their outskirts. The early stages of urban development tend to present the best opportunities for substantial returns as such places start to expand and grow. As the infrastructure improves and services such as schools, water or sewage become available, property values usually rise, providing profitable opportunities for savvy investors in the diaspora. Over the past decade, many neighborhoods in Kenya have been transformed. Many suburbs which had been overlooked in the past are now thriving communities full of parks, schools and shopping facilities. The rapid development has led to an increase in the demand for housing, leading to higher capital appreciation and rental incomes. As such, it is not a surprise that that the real estate sector is the most attractive investment option for many in the diaspora.

Diversification of Investment Portfolio

Real estate investment provide people in the Kenyan diaspora with one of the best ways to diversify their investment portfolio, maximizing potential gains and minimizing risks. Through investment in the housing market, particularly in diverse and growing markets like Kenya, a person can hedge against the volatility that is common with bonds and stocks. Housing market investments have proven to provide stable returns, making them an important component of a well-rounded investment strategy. Moreover, real estate allows the diaspora to balance their assets across different sectors With a robust housing market, they are able to invest in commercial, residential or even mixed-use properties, each providing unique benefits and risks. The variety makes sure that even if one segment does not perform in line with expectations, other investments can continue to provide returns, providing a sense of security in one’s financial planning. The stability is very attractive for people who in the diaspora who have to manage their properties without being physically present in Kenya.

Cultural Affinity and Community Impact

While most of the people in the diaspora mostly invest in the real estate/housing sector, others prefer to invest in buying land. The ownership of land is a source of pride for almost all Kenyans regardless of their financial, cultural, religious and ethnic backgrounds. There are many who have the privilege of inheriting land from their parents and even more who do not have such an opportunity. As such, buying land provides people with an opportunity to own property and improve their standing in their social status. In addition, buying fertile land is attractive for many in the diaspora who would like to invest in agriculture or small industries after retirement. Some of the people in the Kenyan diaspora also buy land and allow their relatives to farm thus improving family and community relationships.

Challenges that Prevent Hinder Diaspora Investments in Real Estate

Unreliable Real Estate Companies

Unfortunately, the real estate sector in Kenya has very high levels of fraudulent activities and many Kenyans in the diaspora has have been conned and defrauded by fake real estate companies. The lack of people to trust in the investment journey can make many in the diaspora pull back particularly if they feel that they could be duped. There have been many cases where of the double selling of land and many people have lost their savings to fraudsters. As such, people are reluctant to invest in the housing sector without having spent years researching on the property and its previous ownership. The investors must should also be aware of red flags during property transactions. For example, pressure to complete transactions quickly without due diligence, unusually low prices, vague contractual terms and excessive site visit fees among others should all raise suspicions for buyers in the diaspora. The good thing is that there are many genuine real estate companies that can guide the Kenyan diaspora and make their investment dream a reality.

High Prices

Investments in the real estate sector are cost intensive and not everyone in the diaspora has the financial resources to pursue them. For example, buying land or property in some areas in Nairobi, Mombasa, Kisumu or Nakuru can be as expensive as land in developed countries such as the United Kingdom and the United States. The high costs required to enter the housing market can be a deterrent against investment for Kenyans in and outside the country. Although there is plenty of cheap land in the country, the land that is attractive for investment in the housing sector tends to be expensive and located in or near the urban areas. The cost of building apartments or commercial buildings in the country is also very high and requires large amounts of capital that can take years to recoup before one can make a profit. In addition, there is always a possibility of being overcharged by unscrupulous actors in the real estate markets. As such, it is always necessary for investors to evaluate a property and know how much they should pay for it.

Difficulties in Finding the Right Property

Finding and investing in the right property is one of the main factors behind the growth of wealth in the housing sector. This includes a variety of factors such as zoning issues, identifying locations with high potential growth, one’s investment goals as well as the condition of the property to mention a few. For many Kenyans in the diaspora, these factors represent an uphill task that requires on-the-ground presence or reliance on trustworthy people such as relatives and friends. This is a path that can also be full of disappointments especially if the investment turns out to be less profitable than expected.

Market Oversupply

Market oversupply poses a significant problem to real estate investors including those in the Kenyan diaspora, potentially causing diminishing property values and decreased demand. This is a growing problem in some of the urban areas in Kenya due to the over-investment in the housing sector as people look to secure their financial future. To navigate this challenge effectively, it is important for prudent investors in the diaspora to adopt a strategic approach which involves a careful consideration of demand dynamics and a thorough market analysis. In addition, they also have to understand local market conditions including factors such as housing demand, population growth and economic trends to identify areas which may be affected by oversupply. This explains why most of the people in the diaspora prefer to invest in rapidly growing urban areas instead of the small towns or rural areas.

Conclusion

In conclusion, it is clear that the real estate sector is a very attractive investment option for many in the diaspora because it provides significant prospects for financial growth and stable revenues. As the Kenyan population continues to grow, the housing demand will also grow and present the diaspora with an opportunity to invest and make money for decades to come. As such, it is expected that the housing sector will continue to be the top investment choice for the diaspora for many years to come. This is because housing properties such as apartments are easier to manage from abroad than businesses in other sectors such as agriculture, wholesale or retail. Moreover, investments in the real estate sector provide an opportunity to create generational wealth meaning that people in the diaspora can secure their children’s future by investing in the housing market.