Kenya Real Estate: Buy or Build a New House?

The process of building a new home can be so complicated because there are so many details that have to be put together. For instance, one has to look for cash for the land, hire an architect to draw up the designs, get a builder or contractor and then supervise the entire project.While hiring a brother or sister offers some reprieve, there are numerous incidences where such a relative colludes with site workers to siphon off cement, steel bars or other building materials during construction work.

Fair price
The hassle of dealing with construction workers is trouble that most people would not want to go into. “There are economies of scale when a developer goes to procure cement in bulk or other building materials and inputs. The only cost benefit that accrues to a person who decides to put up their own house is the fact that they own the land,” said Angelica Wambui, Sales Manager-Superior Homes Kenya Limited.

She adds that the cost of hiring a qualified contractor, architect or a quantity surveyor is expensive and prohibitive to anyone who is intending to build their own house. “In the long run, the cost of buying a complete house is cheaper than going through the hassle of constructing one’s own house,” said Wambui. While a developer is able to secure land easily, it is more difficult for a single individual to buy a plot at a fair price or even get a genuine title. It is not easy for a professional banker or company executive to leave their core business and engage in procurement of building materials or even supervision of construction work.

“One is better off buying a complete house that engage in procurement of building materials, a task that is best suited to developers who can source at the best bargains,” said Daniel Ojijo, Executive Chairman of Mentor Holdings. He adds that those putting up their own houses have to spend more money on security since this property will not be within a gated community. “Unless one is a building contractor, those putting up their own houses mostly end up using substandard materials. Further, the overall cost of putting up one’s own house ends up being higher,” said Ojijo.

Real estate development is a highly specialised undertaking that requires qualified people to execute a building plan. Individuals who engage in this work have to sacrifice their own time away from what they know best. The goal of being an owner builder is mainly to save money. Some people can save quite a bit of money if done correctly. However, most people are not meant to be owner-builders, as it takes a strong personality to manage contractors, suppliers and workers.

Managing contractors to finish on time to show up for work is not for the faint hearted. There are homeowners who may not have the necessary financial muscle to engage a contractor or even secure a mortgage facility from a bank to buy a house. For instance, one requires at least Sh500,000 in their bank account even before opening discussions with a mortgage company or a bank. “We usually require a down payment equivalent to 10 per cent of the house value. A client has also to sort out stamp duty which is 4 per cent of the property value, legal fees and at least Sh300,000 in cash for any sale to go through,” said Wambui.

Cost breakdown
If one has never built a home before and absolutely needs to act as owner-builder, they are advised to hire a reputable builder to supervise the building of this new home, for a much smaller fee than their normal fee. This builder or supervisor will help with the cost breakdown and manage the subcontracting on an as needed basis. The builder can also help when technical inspector issues come up. If one decides to hire a builder to do everything, they should make sure the professional has a good reputation and plenty of references. For those eager to work at their own pace, it is vital to get the estimated cost breakdown of the house.

This is the breakdown of each particular cost of construction of the home—the foundation, lumber, framing, plumbing, heating, electrical, painting, and builder’s profit. The builder usually completes this form to show exactly what it will cost to build the new house. “I find it easy to work on my own design and pace, change the building structure at will and take a breather each time I run out of cash for materials. I am also able to design the house to my own specifications as opposed to buying a complete house,” said David Mwaura, a plot owner in Ongata Rongai.

He adds that mortgage facilities are expensive and puts a huge burden on one’s finances given that most home loan facilities have a repayment period of at least 15 years.

This entry was posted in Home Ownership in Kenya, Kenya House Prices, News and events in Kenya real estate sector, Property in Kenya, Uncategorized. Bookmark the permalink.

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