Land contributes the most cost in housing, yet the resource continues to appreciate by more than 20 per cent every year. This means that the cost of housing continues to increase and out-pricing many Kenyans from owning homes.
To beat this trend, people will be better off pooling funds to invest. On how to do this, we will look at the minimum investment a group of investors can make.
Let’s take an investor with Sh800,000. With this amount, this investor can join 11 others to contribute Sh9.6 million, which would build them bedsitters of 20 square metres each.
This would be in an area where land costs about Sh1 million per plot such as Rongai, Kitengela and Ruai, but within a 1-2km radius from the main tarmac road. In such areas, a bedsitter can fetch about Sh6,500 per month.
The reason for groups of 12 is because this is the maximum number of bedsitters that can be built per floor on an eighth of an acre. Bedsitters are the smallest unit that can be developed in a planned area. They are designed in a way that to have a one- or two-bedroom unit, all one needs to do is enjoin two or three adjacent bedsitters.
For investors with slightly higher savings of Sh900,000 each, pooling this together would amount to Sh10.8 million. With this lump sum, they could buy an eighth of an acre for Sh2 million in places similar to those of earlier investors, only nearer to the main roads.
Bedsitters nearer the road in places like Rongai, Kitengela, Ruai, Kiambu and Juja would attract rental income of about Sh7,200 per month. This would be nearly a 10 per cent return on investment annually.
If 12 investors pooled together a million shillings each, they could afford a Sh3 million plot – an eighth of an acre – in Syokimau, Juja, Kahawa, Kiambu, Ngong, Kiserian, Kitengela or Rongai.
In all these scenarios of investors pooling together finances, the choice of land will depend on what the members of the group agree in discussion forums here: www.a4architect.com/discuss/
On this platform, a potential investor can either start their own discussion topic with request to partner for a certain land price budget in a certain location, or by joining an ongoing topic. For instance, one can start a topic such as ‘Sh2 million land along Mombasa Road’. Other interested investors can then give their contacts in the already started topic.
Once 12 people are in agreement, they are advised to register a limited liability company with 12 directors and 12 shares. Each person will therefore own a share.
The company can then purchase the land, and it will be governed as per existing limited liability company laws in Kenya.
The Articles of Association will clearly describe the location and dimensions of ownership within the company, similar to the descriptions in Sectional title ownership.
Interested investors can visit the address listed earlier and register, then start a topic or join an existing discussion to give their contact details and views.
Gichuhi is a practising architect and principal consultant at A4architect. Email: email@example.com