What is the Best Way to Finance Land in Kenya? (Sacco, Bank)

If you plan to buy land in Kenya, you should understand the various financing options in the country that will ensure lower overall purchase costs.

The best way to buy land in Kenya

The process of buying land in Kenya cannot be completed without the required financing. Factors like location and size determine the amount you need for purchase. Other costs, like legal and appraisal fees, are involved to ensure a smooth transaction. That being said, what financing option is best to cover the entire cost of buying land?

Land buying is an extensive process that must be done correctly for satisfactory results for all parties involved. To avoid getting raw deals or being conned your hard-earned money, you should do a proper land search in Kenya and contract the services of relevant professionals. This will also help you find properties with better selling prices.

How to Finance Land in Kenya

Financing limits the size of land you can buy and its location. Prospective buyers can explore their options and settle on the one that suits their financial capability. Land buyers in Kenya have limitless access to bank loans and SACCO loans, individual financing, or leasing with an option to purchase.  

Buy Land With Bank Financing

Several commercial banks in Kenya offer land financing, although they prefer dealing with incorporated companies to doing business with individuals. The bank will ascertain land ownership and get professionals to do a valuation before approving funding. 

The bank will pay the purchase amount with the land as collateral. The title can bear the bank’s name or both the bank’s and yours. Ownership will be transferred to you after clearing the loan amount. 

One of the disadvantages of approaching your bank for land financing is its higher and more variable interest rates. Most commercial banks do not deal in land purchases because a land property is considered riskier if it does not have a home.

READ ALSO: Can a Foreigner Buy Land in Kenya?

READ ALSO: How To Avoid Getting Scammed When Buying Land in Kenya

Buy Land With Sacco Financing

SASRA-registered Saccos in Kenya allow members to borrow against their savings. Some have investment options, although deposit-taking SACCOs are not legally permitted to purchase or invest in land because real estate is not part of their core business. They can, however, finance your land through loans.  

The amount of loan you qualify for is usually three to four times the size of your savings at the SACCO. One advantage of SACCO loans over bank loans is that they are easier to access as long as you are a member.  

A member of the SACCO can become your guarantor, unlike banks that ask for collateral for secured loans. They are cheaper and pay higher interest rates on member savings. They also pay dividends to their members. 

READ ALSO: A Beginner’s Guide to Buying Land In Kenya

Which Sacco Has the Best Interest Rates in Kenya?

Several SACCOs in the country have great interest rates. The top five include; 

  1. Unaitas SACCO: Between 1% to 1.5% per month on reducing balance for a period of up to 72 months 
  2. Kenya Police SACCO: 13.5% on reducing balance for up to 48 months. 
  3. Stima SACCO: 1% per month on reducing balance for a repayment period of up to 60 months 
  4. Waumini SACCO: 12.5% per year for a repayment period of up to five years 
  5. K-Unity SACCO: 1% per month on reducing balance with a repayment period of up to 36 months. 

Buy Land With Individual Finances

Individuals with all the funds needed for land purchase can complete the sale without the need to borrow. When you buy in cash, the overall cost of acquisition is reduced. You will have strong negotiating power, and the process will be fast since you do not have to wait for a bank to approve a loan. 

The downside of buying with cash is that the buyer will lose liquidity. Unless you are financially stable, it is better to get land financing then use cash on hand to invest in the land. Relying on your money may also limit the size of land you can purchase.

Purchase Land With Chama

Two or more people can buy land together by sharing the cost, responsibilities, benefits, and risks of the purchase. The benefits of this arrangement include being able to buy a large piece of land with less money. It is also easy to maintain because all the chama members will give input. 

Buying land with chama comes with its cons. If the members contribute unequal financing, a disagreement is likely to occur when it comes to investing. Decision-making may also be challenging when partners fail to find common ground.

READ ALSO: Common Land Investment Myths You Will Be Glad Aren’t True

How to Buy Land With No Money

It is possible to purchase land without cash. The top options to consider are;

  • Seller financing: A prospective buyer gets the land from the owner and makes payments over time. The seller has the option to foreclose if the buyer fails to pay. However, this option may be riskier for the buyer because the landowner is not regulated. You may also end up paying more than the actual cost. 
  • Lease with the option to buy: Lease payments over time can be used as principal funds to make a purchase. If funds from the lease are not enough, you can finish the remaining amount with seller financing or get a loan. 
  • Work out a trade: You can exchange another piece of property as a down payment for the land. An appraisal may be needed to determine the property’s actual value. 

In Conclusion

Land buying in Kenya is possible for anyone who wants to build a permanent residence or invest. The land financing option you choose should cover all the purchase needs without placing you in a huge financial burden. 

READ ALSO: What to Know About Property Laws in Kenya

Nixon Aswani - Content Strategist
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