How Kenyans in the Diaspora Can Finance Property Back Home

Financial Options for Diaspora Property Investment

Kenyans in the diaspora have several viable financial options to realize their property ownership aspirations:

1. Diaspora-Targeted Mortgage Products from Kenyan Banks

Several prominent Kenyan banks offer mortgage products specifically designed for Kenyans living abroad. These mortgages recognize the unique circumstances of diaspora clients and often provide tailored features. Some of the key players in this space include:

• NCBA Bank: Offers diaspora mortgage solutions with competitive interest rates and flexible loan terms, with repayment periods extending up to 25 years. Their “Easy Build” product also caters to those looking to construct their own homes, offering staged disbursements and construction monitoring. Interest is calculated on a reducing balance basis. They also offer equity release options against existing property.
• Co-operative Bank: Through its “Co-op Diaspora Banking,” the bank provides mortgage facilities in KES, USD, GBP, and EUR. Loan amounts can go up to 80% of the property value for single residential units, with repayment periods of up to 15 years for KES loans and 10 years for foreign currency loans. They consider rental income as part of the repayment ability.
• KCB Bank: Offers the “KCB Diaspora Mortgage” in KES, USD, and GBP for purchasing ready-built homes, constructing properties, and buying plots with simultaneous construction. They also have a “Mortgage Plus” option for topping up existing mortgages. Their “Diaspora & Advantage Mortgage” targets higher-income earners and considers joint income and rental potential. The maximum loan tenure for diaspora clients under this product is typically 20 years.
• Equity Bank: Provides diaspora credit facilities, including residential mortgages for purchasing single-family homes or apartments, commercial mortgages, construction loans, and plot purchase financing. They also offer diaspora credit cards.
• National Bank of Kenya: Has specific “Diaspora Mortgage” products designed to facilitate property investment without the need for frequent travel back home. They offer financing for outright purchases of developed property, plot purchases, and equity release.

Key Considerations for Diaspora Mortgages:

• Interest Rates: Interest rates vary between banks and are subject to prevailing market conditions. Some banks offer fixed rates, while others have variable rates linked to a base rate. It’s crucial to inquire about the current interest rates and the basis of calculation (e.g., reducing balance). As of late 2024, average mortgage interest rates in Kenya were around 14.3%, with a range of 8.7% to 18.6%. However, diaspora-specific rates may differ.
• Eligibility: General eligibility criteria often include being a Kenyan citizen, being gainfully employed in the country of residence, and demonstrating the ability to repay the loan. Banks typically require notarized documentation, including:
  • Filled application form
  • Passport and Kenyan ID copy
  • KRA PIN certificate
  • Latest 6 months’ payslips
  • Letter from employer confirming employment
  • Latest 6 months’ bank statements where salary is credited
  • Offer letter or sale agreement
  • Copy of the property title (with a minimum lease period, often 35 years)
  • Passport-sized photographs
• Timelines: The mortgage process involves several stages, which can take time, especially for diaspora clients due to the need for international document verification and valuation. A typical timeline can involve:
  • Preliminary Appraisal: 1 day (submission of documents and application)
  • Approval Process: 4-7 days (valuation and credit assessment)
  • Acceptance of Offer Letter: 15 days for the applicant to accept
  • Security Perfection/Conveyance: Approximately 2 months (legal processes, title transfer)
  • Funds Disbursement: Around 1 week after completion of legal processes.
  • Construction loans will have longer timelines due to staged disbursements.

2. Joint Ventures with Family

Pooling resources with family members living in Kenya can be a practical way to finance property. This approach can ease the financial burden on an individual and leverage the local presence of family for property identification and management.

Key Considerations for Joint Ventures:

• Formal Agreements: It is crucial to have a clear and legally binding agreement outlining the contributions of each party, ownership structure, responsibilities for management and maintenance, and a plan for future eventualities (e.g., sale, inheritance).
• Trust and Communication: Given the personal relationships involved, open communication and mutual trust are paramount to avoid misunderstandings and disputes.
• Legal Due Diligence: Even with family involvement, thorough due diligence on the property, including title verification and legal checks, is essential.

3. Developer-Financed Payment Plans

Many real estate developers in Kenya offer flexible payment plans, particularly for off-plan properties. These plans allow buyers to make installment payments over a specified period, often coinciding with the construction timeline.

Key Considerations for Developer Financing:

• Interest Rates and Fees: While some developer plans may be interest-free for an initial period, others may include interest charges or fees. It’s vital to understand the full cost implications of the payment plan.
• Eligibility: Eligibility criteria vary depending on the developer and the project. They may require a certain percentage of the purchase price as a down payment and proof of income or ability to meet the payment schedule.
• Timelines: Payment timelines are usually linked to construction milestones. The final transfer of ownership typically occurs upon completion of all payments.
• Developer Reputation: It is crucial to work with reputable and established developers with a proven track record to minimize the risk of project delays or failure.

Additional Tips for Diaspora Property Buyers

• Conduct Thorough Due Diligence: Whether financing through a mortgage, joint venture, or developer plan, always conduct thorough due diligence on the property, including title verification, legal checks, and physical inspection (if possible, or through a trusted representative).
• Engage a Reputable Lawyer: A lawyer specializing in real estate in Kenya can guide you through the legal processes, review contracts, and protect your interests.
• Consider Property Management Services: If you plan to rent out the property, explore property management services to handle tenant sourcing, rent collection, and maintenance while you are abroad.
• Stay Informed About Market Trends: Keep abreast of the latest trends in the Kenyan real estate market to make informed investment decisions.

Conclusion

Financing property in Kenya from the diaspora is achievable through various tailored financial products and alternative arrangements. By understanding the available options, eligibility requirements, and timelines, and by taking necessary precautions like due diligence and legal representation, Kenyans abroad can confidently invest in property back home, strengthening their connection to their heritage and securing their financial future. The Kenyan real estate market continues to offer promising opportunities for diaspora investors, and with careful planning and the right financial strategy, owning property in Kenya can become a reality.