Hidden Charges That Hike Land Prices in Nairobi

  • A block of apartments in Nairobi.
    A block of apartments in Nairobi.
    File
  • Buying land and settling around Nairobi County and its environs is among the priorities of most city dwellers. In the process, most buyers encounter additional charges other than the price of a house or land.

    These additional charges are known as transaction costs. Most of these transaction fees occur while purchasing a property while others are fixed depending on the location of the land, type of documents required, and commission fees charged by professionals who are overseeing the whole transaction.

    The transaction fees in most cases amounts to almost 10-15 per cent of the cost of acquiring the property but to naive buyers, they end up paying more if not well advised.

    Here are some of the additional charges that are associated with acquiring property.

    An apartment block in Karen Estate, Nairobi.
    An apartment block in Karen Estate, Nairobi.
    File

    Plot Viewing Fee

    Most real estate professionals warn individuals against paying the viewing fee before setting their eyes on the property. But before one agrees to purchase land, viewing is part of the process which involves getting the exact measurements and getting to know more about the location.

    In most cases, a buyer is charged up to Ksh2,000 non-refundable depending on the real estate agent overseeing the sale of the property. 

    "A majority of the real estate, ours too, do not charge but only oversee all the aforementioned charges which are normal and procedural in land dealings. 

    "The charge familiar with real estate agencies is the land or plot viewing fee, charged when you express interest to go and view a plot of land before purchasing. Some companies charge Ksh500 or Ksh1,000 which is non-refundable. Some like us and others offer free site visit," Moses Muriithi, CEO at Fanaka Real Estate told Kenyans.co.ke.

    Lawyer Fees

    For any land or property transaction to take place, a lawyer must be present to witness the deal. Their presence in that process attracts some legal fees which the buyer is expected to pay.

    In Kenya, the Advocates Remuneration Order states that the minimum amount to be paid to any lawyer undertaking such a process is Ksh35,000.

    This fee varies with law firms and the value of the property being purchased. A lawyer's role in the process involves conducting due diligence on the land before and after the transaction. 

    The lawyer's role is also instrumental after the commissioner's office gives the buyer approval and transfer papers are supposed to be prepared.

    "The lawyer's fee is guided by the law. One cannot overcharge or charge below the stipulated amount. The figure starts at Ksh35,000 but it varies depending on the value of the property," Lawyer Ken Mugambi told Kenyans.co.ke.

    "This enables a legal practitioner to do all the due diligence to ensure that a client buys the right property and gets all the required documents."

    Search fee

    For one to establish that the land is legit and is registered under the real owner, a property search has to be carried out. This includes previous legal fees linked with the land.

    Through the online platform, eCitizen, the property search is usually Ksh500. Before this process, a buyer usually meets with the Land Control Board (LCB). These meetings require a facilitation fee of Ksh1000. 

    Alternatively, a land buyer can book another meeting with a Special Land Control Board that is made up of the Assistant County Commissioner and the two transaction parties. The facilitation for these meetings cost Ksh5000.

    Stamp Duty

    After the transaction is completely done, a duty fee is levied on all the transactions. The amount levied at this stage varies depending on different locations and the price of the property.

    In areas around Nairobi, Mombasa, Nakuru, Kisumu, Eldoret, and other urban areas, 4 per cent is levied for land and property while those in rural areas are levied a fee of 2 per cent on the value of the acquired property.

    Other than stamp duty, there is also capital gains tax which is required to be paid strictly through the iTax system. This is usually charged at 5 per cent of the net gain value.

    Registration Fee

    This fee is paid to the land Registry for purposes of making entry into the registry and title printing costs. This is roughly around Ksh500 to Ksh1,000.

    Transfer of Consent

    This is usually written permission of the relevant authority, the property owner or any other interested party that okays the transaction of property which is mandatory according to land and property laws.

    Consents vary depending on the tenure of the land. The consent include, Land Control Board Consent or Consent to Transfer from the Lessor.

    A fee of Ksh1000 is applicable to transfer from the commissioner of lands that is paid by the land buyer.

    Valuation Fee

    This is the process of analysing the property to determine its market value. This is essential as it is used to inform the calculating taxes, sale value, or even leasing value.

    Plots within the municipal council administrative unit charge Ksh1,000 while those in urban centers, in this case, Nairobi, charge Ksh500. However, some real estate agents pay this cost for their clients.

    Utility Fees

    In areas around the city, most buyers are required to dig deep into their pockets to pay some utility fees such as water, electricity, and garbage collection. In other developed residential areas, buyers are required to pay for security, road maintenance among others.

    "In some areas, like here in Katani, Machakos county, one is expected to pay security fees and even for road maintenance. The prices vary, like for security each house is supposed to pay close to Ksh300 monthly while for road maintenance, each household is expected to pay Ksh4,000 annually," an official of Shangilia residents association based in Katani told Kenyans.co.ke.

    He added, "buyers are also expected to pay some fees for maintaining the street lights among other small incurring costs as the residential area is fully independent."

    Mortgage Fees

    Most buyers finance their property using credit. In this case, one is required to pay some additional fees to the lenders. When paying back, they pay with interest. This adds up to the hidden costs one is required to incur before acquiring a property in Nairobi.

    The additional transaction costs vary depending on the value of land among other factors that come into play.

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    A File Image of Houses in Mugoya Estate
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