With the Kenyan Shilling depreciating against major currencies including the United States Dollar, many business people are finding ways to cushion themselves against eventual losses.
In particular, a section of landlords in Nairobi have started demanding rent payments in Dollars as the Shilling continues to show signs of volatility.
Kenyans.co.ke spoke to real estate agents within Nairobi to learn more about the shifting trend in rent collection.
It was noted that most landlords asking for rent in dollars have their properties located in affluent neighbourhoods including; Westlands, Karen, Gigiri, Runda, Kileleshwa, and Muthaiga among others.
Shunguli Duncan of Rock Field Properties told Kenyans.co.ke that the number of landlords demanding that rent be paid in Dollars had increased exponentially in recent times.
“Some of the owners are not local, they are expatriates. They prefer dollars because of the instability of the Kenyan Shilling,” he explained.
Shunguli added that most of the foreign owners had used financing facilities to acquire loans to build the houses.
Since often the loans were acquired in another country charging Dollars, they prefer having the payment in the American currency.
Shunguli who leads one of the top real estate companies in the capital explained that this cushions the landlords from loan default.
He explained that if the owner pays USD1,000 per month to service his loans, he can list the house for a similar amount and be sure he will be able to repay the loan.
Should the landlord decide to charge Ksh163,000 per month, he will be able to convert the money to pay the USD1,000 loan amount. Next month, if the Shilling depreciates further, the Ksh163,000 could be USD950 leading to a loan default.
Another real estate agent who spoke on condition of anonymity remarked that many Kenyans were finding the practice lucrative.
“I have local landlords making a lot of money out of the depreciating Kenyan Shilling. Last year, they used to receive after conversion Ksh139,000 for a house listed for USD1,000. Now they receive Ksh163,000 and that amount could go higher next year,” she explained.
Shunguli remarking on the issue of local tenants charging Dollars explained that it was not only illegal but also could lead to losses.
“First, they have to set up a Dollar account. One thing they do not understand is that to convert back that money into Ksh you will get way less,” he explained.
He explained that Kenyans who were benefiting from charging rent in Dollars were those in the export and import business.
“This helps because they can use their Dollar accounts while importing goods from overseas,” Shunguli enlightened Kenyan landlords.
