Are you buying in Kenya as a non-citizen? Need help?
You don’t need a particular type of visa, or citizenship to secure the keys to a home in Kenya. However, you need to obtain certain requirements, such as a tax pin and meet specific criteria to secure a mortgage as a non-citizen. You’ll also need a hefty down payment, a great credit history (in Kenya or abroad) and a stable income.
While it may be a more complex process for non-residents, don’t be discouraged.
The Housing Landscape for Foreign Homebuyers
Stable returns, diversifying your investments, low-interest rates, steadily increasing home prices, and a potential path to Kenyan residency – these are just some of the prime reasons why there is such strong international demand for Kenyan property.
International buyers inject billions into the housing industry. Foreign buyers from China are the leading buyers in 2019 spending millions of shillings.
It’s no surprise that one in five international homebuyers purchased their property in Nairobi.
A Twist on the Basics to Getting on the Property Ladder
As an international homebuyer, the home buying process is similar to what you’d encounter at home. But as a foreigner, you need to jump through a few more hoops. Solid savings for a down payment, a great credit score, and proof of stable income are always important when you want to purchase real estate.
A big difference in the home buying process for international buyers is that, while you don’t need citizenship or a visa to buy property, it’s mandatory that you apply for and obtain a KRA pin. The KRA pin is a tax processing number issued by the Kenya Revenue Authority.
Just like anywhere else in the world, you need to make your case to lenders that you’re a responsible candidate for a mortgage, too. Good credit is crucial here, whether you have a solid credit score from your home country. Or if you’ve strategically opened up a Kenyan bank account and credit card, both of which you’ve kept out of the red to cultivate your credit history.
Consider Your Status
Your route to securing a mortgage and a home in Kenya depends on whether you’re a dual citizen, on a work or study visa or outside the country. Here’s how these various groupings differ:
Dual Citizen Holders
Getting approved for a mortgage is much easier for a dual citizen. They have access to nearly identical privileges as any citizens when it comes to getting a mortgage. These groupings may even qualify for a SACCO loan( if they join one). They’re up for grabs for both permanent and temporary residents, too.
People On Work
Those in the country for work are also entitled to loans but need to provide your Employment Authorization Document and your ID/Passport to qualify.
Temporary workers are a bit of a ticking time bomb for lenders. They may need a letter from your employer that shows they’re committed to extending your contract. Or some proof that you will be living and working in Kenya for the next few years. They need to do their due diligence to make sure you’ll stay committed to repaying your mortgage and that you’ll have a steady income to cover it.
In both instances, if you’ve been in the country for more than two years and you have a paper trail outlining your employment, citizenship, income, and good credit history. This will help you significantly by showing your creditworthiness to lenders. If not, you may want to work towards strategically building up good credit by regularly paying your credit card and other bills.
Homebuyers From Outside Kenya
If you’re not in the country at all, don’t worry – you’re still eligible to buy property in Kenya. You just won’t have access to some loans. Plus you’ll need a much higher down payment to convince a lender to loan you the rest.
You’ll also need thorough paperwork documenting your identification, salary, income and bank statements, and reference letters from your creditors. Lenders may review your income to make sure everything checks out too.
Cash is Great, But Non-Residents Can Secure Mortgages Too
The easiest route to homeownership as an overseas buyer without any ties to Kenya is to pay for your home in cash, avoiding the need for a mortgage.
Most foreign investors buying up rental properties have deep pockets. Hence, most international buyers purchase homes with all-cash transactions, compared to just one-third of domestic sales to Kenyan citizens.
Not everyone can cough up the full price for a home, or they may want to take advantage of low-interest rates on mortgages. If you’re purchasing a home that serves solely as a rental or investment property, there are mortgage programs offered by certain lenders. They’re precisely for those who don’t plan on being citizens or living in the home they’re buying.
These loans are typically about two to four per cent higher than conventional mortgages. This isn’t too much of a setback considering how low-interest rates have sat at over the past few years.
Across the board, you’ll need to establish a bank account in Kenya and deposit your down payment into this account, too. This account will also hold onto your cash to cover other costs too, such as lender fees, closing fees, and homeowners insurance – all of which apply to international buyers and Kenyans alike.
Build Your Team
As an international homebuyer, you’re a unique segment of the real estate market in Kenya, but there are specialized experts that know exactly what you need to do to buy your home. Your job is to assemble your roster of professionals from real estate agents, to attorneys, mortgage brokers and bankers. They’ll do the heavy lifting for you, making the process much smoother and less daunting.
Some real estate agents focus their business on foreign homebuyers – and their work includes travelling to your interested properties. They are experienced in working with foreign homebuyers. Clearly, understand the paperwork and number-crunching involved to help their clients successfully buy Kenyan property.
They also have direct links to lawyers, loan officers and accountants who can help foreign homebuyers with the process.
Pay attention to certain builders too, as some developers welcome foreign homeownership and partner with lenders who offer mortgages to international buyers.
Finally, do your research on banks as several offer home financing solutions for international borrowers. HF Group, for example, notes that international clients shopping for a mortgage on an investment property in Kenya don’t need Kenyan credit history – instead, an international credit report would suffice.
Equity Bank and Standard Chartered are also among the list of banks that offer a specialized approach for international buyers, whether as ex-pats or international investors.
It’s worth shopping around to see what interest rates and what loan amounts lenders will pre-approve you for. You’ll also notice that some lenders make an international borrower jump through more hurdles than others.
Prepare for the Differences
Between the terminology and the products, taxes and fees, foreign homebuyers are bound to come across some culture shock – sometimes good, and sometimes bad.
For example, all homebuyers need to account for annual property taxes when purchasing a home in Kenya. These taxes vary according to the county. On one side of the country, property taxes could be a meagre hundred shillings, while in another county, it could be in the thousands.
Depending on your nationality, property taxes in the thousands could seem unreasonable. However, if you’re originally from Hong Kong, London, or Tokyo – where property taxes are notoriously high – thousands of shillings may seem like a deal.
You may need to wrap your head around the various mortgage options available to you too from fixed to variable rates. Fixed-rate mortgages lock in the same interest rate for the duration of your loan agreement, while variable rates can fluctuate. This may be different from Europe, where especially low-interest rates may be offered only as an initial promotion.
Real estate fees, rigorous credit checks, inspection fees, and closing costs – these expenses may be unnatural for international buyers, too. It’s important to get up to speed on what you’ll encounter and earmark enough savings to cover these expenses.