The journey of buying land in Kenya is an exciting endeavor, often filled with dreams of building a home or making a sound investment. However, beneath this seemingly straightforward process lies various hidden costs that can catch even the most vigilant buyers off guard. Beyond the visible price tag of the land, multiple expenses, fees, and considerations may significantly impact your overall investment.
In this guide, we highlight 10 hidden costs when buying land in Kenya that every prospective buyer should know. Let’s get into it!
What are Hidden Costs?
Hidden costs refer to expenses associated with a particular transaction or investment that are not immediately apparent or included in the initially quoted price. In the realm of buying land, buyers may encounter several hidden costs. These costs can significantly impact the overall expense of acquiring and developing the land.
That said, here are the main hidden costs when buying land in Kenya:
1. Legal Fees
When acquiring land in Kenya, legal processes demand professional scrutiny. Legal fees encompass payments to lawyers for document verification, title deed checks, and ensuring compliance with land laws. This expense is often underestimated, and complexities can arise, necessitating legal expertise.
The Advocates Remuneration Act in Kenya stipulates that a minimum of Ksh. 35,000 is payable to lawyers. You can allocate 1-2 percent of the land’s purchase price for legal fees. Nevertheless, you should ask the land seller if the sale price includes legal fees, transfer forms, sale agreements, and other legal documentation.
2. Stamp Duty
Stamp duty is a governmental charge on property transactions, acting as a legal endorsement. In Kenya, the buyer bears this cost, calculated based on the property’s value. This financial outlay is crucial for the legality of the transaction, but its significance can be obscured amidst other expenses.
Stamp duty in Kenya is charged at a rate of between 2% for properties located in municipalities and 4% for those outside municipalities. The payment is made to the Kenya Revenue Authority (KRA). It’s advisable to know if this cost is included in the overall price of the land.
Also Read: How To Differentiate Fake And Genuine Title Deeds
3. Title Search
Land Title Deed Search is the process of getting documents showing the land’s history. It is a critical step in land acquisition, revealing the property’s ownership history and legal status. However, the associated costs are frequently underestimated. To search, you can go online if your land is registered with the Nairobi registry.
Searching for and verifying the title can incur charges, and overlooking this in your budget can lead to unexpected financial strain. Prospective buyers should diligently account for title search fees to avoid unpleasant surprises. The cost for a title deed search is Ksh. 500.
4. Rates and Rent
If the land is under a leasehold, the registered owner is required to pay rent to the national government if the leasehold tenure is from the government. Rates are paid to the local government where the land is located. These recurring payments contribute to the holistic financial commitment of land ownership, often overlooked in the excitement of acquisition.
It is crucial for you to get the updated records for rent and rate payments to help you handle future queries on the payments.
5. Registration Fees
Registration fees are made for entry into the land registry and the cost of printing title deeds. The cost is typically Ksh. 500 for registration and Ksh. 1,000 for attestation. Before making payments, ensure you know if they are included in the land cost.
6. Consent of Transfers
Certain land transactions require consent from relevant authorities, adding a layer of complexity and cost. The consent of transfers is usually a written permission from a manager, proprietor, relevant authorities, or any other interested person as per land registration laws. Some of the consent that may be required include consent to transfer from the lessor and land control consent board.
The cost for different consents of transfers differs, costing between Ksh. 1,000 and 2,000. You may also require clearances such as rates clearance certificates.
7. Plot Deposit
When purchasing land in Kenya, the initial plot deposit may only be the tip of the financial iceberg. Hidden costs often emerge during the transaction, such as additional down payments or unforeseen charges related to land acquisition. It is crucial to thoroughly understand the deposit terms and be prepared for potential financial surprises that may arise during the process.
8. Valuation Fees
Professional property valuation is necessary to determine the market value of the land. This helps calculate taxes and enables the sale, lease, and land acquisition. Some companies cover the valuation cost for their clients, so it’s important to inquire more about the valuation fees.
The valuation cost is typically Ksh. 1,000 for plots within municipalities and Ksh. 500 for land in other urban areas. But the valuation of stamp duty is free.
9. Land Viewing Fees
While it may seem straightforward, land viewing can accumulate unexpected costs. Transportation, guided tours, or related expenses can quickly add up, especially if multiple visits are required before finalizing a purchase decision. These seemingly minor costs can strain your budget, making it imperative to include potential land viewing fees in your financial planning.
While various real estate firms have different land viewing costs, most charge a non-refundable fee of between Ksh. 500 and 1,000.
10. Emergency Costs
Emergency costs are unforeseen financial setbacks that can occur during the land-buying process. These may include sudden legal complications, unforeseen property disputes, or unexpected delays in the transaction. Having a financial buffer to address these emergency costs is crucial to prevent potential land acquisition disruptions and safeguard your investment.
Other Hidden Costs When Buying Land in Kenya
Apart from the above hidden fees, here are others that you should be aware of:
Brokerage Fees
When utilizing the services of a real estate agent or broker to facilitate the land purchase, be aware that they typically charge a commission. This fee is usually a percentage of the land’s value and is an additional cost to factor into your budget.
Brokerage fees can range from 2% to 5% of the land’s purchase price. Clarifying and agreeing on the commission percentage with the broker before engaging their services is essential.
Utility Connection Costs
If the land lacks essential utilities such as water, electricity, or sewerage, connecting to these services can incur additional expenses. Check with utility providers for specific connection fees and any ongoing charges for securing these services for the purchased land.
Infrastructure Development Levies
In some instances, developers or local authorities may impose infrastructure development levies. These fees are intended to cover the cost of developing amenities and services in the area where the land is located. When considering a land purchase in Kenya, it’s important to inquire about these potential levies and factor them into your overall budget.
Community Fees
Some areas may have community fees or contributions that residents or landowners must pay to maintain and develop communal amenities. These fees can vary and should be considered when buying land in certain planned communities.
Are Hidden fees illegal?
According to Article 35 of the Kenyan constitution, every citizen has a right to access the necessary information. Therefore, charging hidden fees can lead to legal action as it violates consumer laws.
