Real estate investment in Kenya has gained significant popularity due to its potential for wealth creation and steady income streams. However, financing plays a crucial role in making these investments possible. Some of the real estate financing options in Kenya include:
Bank mortgages is one of the most widely used methods of financing real estate. This involves borrowing funds from a bank to purchase a property. The bought property then serves as a security or collateral for the loan. The bank requires a down payment which usually might vary from 10% to 30% of the property’s value. The remaining amount is then repaid in monthly installments over a specified period. It’s important to choose a bank that meets your needs because different banks offer different interest rates and terms. Examples of banks offering mortgages include House Finance Group previously known as House Finance Company (HFC), Stanbic Bank, Equity, KCB, Diamond Trust Bank (DTB), Standard Chartered etc.
Savings and Personal Funds
Using personal savings or funds to finance a real estate investment is another viable option. You can use your accumulated savings to finance your investment. Using your personal savings is advantageous because you’re able to avoid debt and interest payments which are associated with bank loans.
Cooperative Societies (SACCOS)
Cooperative societies are popular in Kenya and can provide an alternative method of real estate financing. The main objective of cooperatives is to improve the financial condition of the members. In Kenya there are over 14,000 cooperative societies currently registered with the largest being Mwalimu Cooperative Savings & Credit Society Limited. These societies pool resources from their members to invest in various projects, including real estate. As a member of a cooperative society, you contribute a fixed amount regularly and can access financing for property through the society. Cooperative societies typically offer competitive interest rates and flexible repayment terms, making them an attractive option for individuals who may not qualify for bank mortgages. Examples of cooperative societies in Kenya include Mwalimu SACCO, Harambee, Stima, Kenya Police and Afya SACCO.
This method entails entering into partnerships with other interested individuals or companies to fund your real estate investment. In partnerships you are able to combine resources, talents, and experience with the other participants in the partnership to invest in real estate. Each participant provides funds or assets, and the profits made from the investment are divided according to the conditions you agreed upon when forming the partnership. Partnerships enable risk-sharing and access to greater investment possibilities due to the large amount of resources, making them an efficient method to fund real estate projects.
This method of financing involves property seller financing the buyer. In this method, the buyer makes a down payment which the amount they have agreed with the seller and then pays the remaining amount in installments which in almost all cases has some interest over a certain period of time. This is a good financing method when the buyer can’t have access to bank loans or prefers more flexible terms which the banks can’t offer.
Mortgage refinancing is the process of taking loan to use for paying off an existing mortgage loan then replacing that mortgage loan with the new one, usually to take advantage of better interest rates or to access additional funds. The lender will then use the new mortgage to pay off the old one. Individuals with existing mortgages can use mortgage refinancing to extend their loan term so as to lower their monthly payments or extend the repayment period to save on interest. By refinancing, property owners can access cash to invest in additional real estate or use the funds for other purposes, such as renovations or debt payment. Kenya mortgage refinancing I want to win company (KMRC) is a good example of an institution offering mortgage refinancing.
In conclusion, there are different real estate financing options in Kenya made to suit different investment needs and financial situations. Whether you opt for traditional bank mortgages, personal funds, cooperative societies, partnerships, seller financing, or mortgage refinancing, it’s crucial to assess your financial capacity and your goals before making a decision. It is advisable to research and compare the terms and conditions of each financing option, seek professional advice, and ensure legal compliance throughout the process. By understanding these financing methods, you can confidently embark on your real estate investment journey in Kenya.