An increasing number of young Kenyan professionals are choosing to invest in apartments rather than land. The reason? Unlike land, which may remain as dead capital for years, apartments promise higher returns.
For decades, the older generation of Kenyans has mainly focused on one investment: land. Quite a number have been storing their wealth in the form of plots in city outskirts, intending to sell in tough times. But the younger generation has steered clear of land, and is buying apartments to either live in, or rent out.
Johnson Denge, a real estate expert, says that when it comes to young people, the decision to invest in land or apartments is usually driven by investment logic, taking into account factors such as liquidity, lifestyle and market conditions, adding that the current market favours apartment buyers.
“There is an oversupply of apartments in the market, making it a buyer’s market. This has lowered investment barriers in apartments from an acquisition point of view, but also easy disposal in the ready rental market in Nairobi, where over 80 percent of the residents are tenants.”
Mr Denge adds that the demand has also been spiked by short-term rental opportunities.
“There is also a short stay market in Nairobi which attracts young people to opt for apartment investments [where they buy and rent out on platforms such as Airbnb],” he says.
“Apartments are turnkey ready, which makes them easy to rent either for long stay or short stay, easy to manage under management companies, located in areas with amenities and disposable income and reduced entry barriers,” he adds.
He also lists behavioural and structural shifts, such as the use of positive peer pressure and the ease with which information can be accessed, particularly through social media. Listings have also become commonplace and relaxed planning rules allow for a high supply.
Current cost of apartments
“The cost varies with the market, with as low as Sh70,000 per square meter in low to upper lower markets and satellite towns, and as high as Sh200,000 per square meter in upmarket areas like Westlands, Nairobi,” Mr Denge says.
In absolute terms, “You can get a studio apartment for as low as Sh1.8 million, a one-bedroom at Sh2.5 to Sh4 million and a two-bedroom at Sh4 to Sh7 million in relatively well serviced metropolitan markets,” he adds.
However, he notes that most first-time buyers are still in the sub-Sh10 million bracket.
“They are mostly in units below Sh10 million. This is mainly driven by access to financing. The Kenya Mortgage Refinance Company (KMRC) facility of single-digit interest rate and up to 25 years is a major catalyst,” Mr Denge says.
But the demand is strongest along established and emerging nodes.
“We have seen movement on traditional trunk nodes of Mombasa Road, Ngong Road, all the way to Ngong and Lang’ata. Recently, there has been a lot of interest in Ruaka, Kiambu Road, Kabete and the other satellite towns.”
Despite the rising demand, many buyers still make costly mistakes.
“They include lack of due diligence on the title or ownership, hidden costs like service charge, lack of due diligence on neighbourhood character, and not inspecting shared amenities.”
He adds that infrastructure is also often ignored.
“One needs to inspect shared infrastructure, for instance, there might be lack of a sewer, which will mean more costs in non-solid waste management.”
Beyond the purchase price, buyers in most cases also underestimate the total acquisition costs.
“Mainly closing costs, which can be five percent to 10 percent of the value, including legal fees, stamp duty, running costs or service charge and letting fees if it is acquired for rental income.”
What buyers must know before committing
While market dynamics explain why young Kenyans are buying apartments, the legal structure determines what they are actually buying. But what should you really know before buying an apartment?
With glossy billboards and polished property listings promising modern living — tight security, a gym downstairs, and a parking space with your name on it — it is easy to rush into a purchase fuelled more by the dream of escaping rent than by a clear-eyed assessment of what ownership actually entails.
Prudence Mwende, an advocate as well as a property and conveyancing specialist, says that most buyers make mistakes at the earliest stage of engagement with developers.
“The letter of offer is the first document you need once you interact with the developer,” she says.
Prudence Mwende, an advocate of the High Court and a property and conveyancing specialist.
Photo credit: Pool
Besides that being the first duty of a buyer, you also need to slow down and demand clarity before committing.
“There are particular documents you are supposed to ask for. You can ask for these yourself, or you can get independent legal advice so that an advocate requests these from the developer’s advocate. Basically, the title documents are among the first documents you should ask for so that you can be able to do due diligence.”
She adds that approvals are just as important as the title itself, which will require you to have independent legal advice to verify them. Another important but overlooked question, she says, is what ownership structure the buyer will eventually hold. The advocate explains that apartment ownership depends on the development structure.
“Depending on the structure of the development, it may involve a sectional title, a lease, or a sub-lease. It is important to understand the document itself and also the rights and obligations attached to it.”
Sectional title vs sub-lease
According to Ms Mwende, a sectional title is just like the equivalent of a title deed when you are buying a standalone house or land. She explains that it gives direct ownership of an individual unit.
“It allows an individual apartment unit to be owned separately and registered in the owner’s name. It identifies a specific unit and records the owner’s interest together with common property.”
Common property includes shared spaces such as corridors, lifts, parking areas, gyms, swimming pools, staircases and gardens.
Buyers also receive a “unit share” in this shared property, depending on their ownership.
She explains that sub-leases operate differently.
“A sub-lease is an interest derived from a master lease and is therefore subject to the terms and conditions of that lease structure.”
A master lease is the main lease over the land on which an apartment development is built. It is usually held by the developer or property owner. This means the apartment owner has rights to the unit, but those rights are subject to the terms, conditions, and duration of the underlying master lease.
For instance, if a developer holds a 99-year lease over a piece of land, an apartment buyer may receive a sub-lease that derives from that 99-year lease.
Which ownership structure is better?
In her opinion, a sectional title has stronger protection and clarity.
“Sectional title has an advantage because you are getting individual ownership compared to a sub-lease.”
It has grown to become the common structure and is also more useful when it comes to financing.
“It can act as security when getting financing from banks. It is like having full ownership, similar to a logbook when you buy a car. Before, sub-leases were common, but since the Sectional Properties Act 2020, there is greater clarity and certainty in ownership.”
Consequently, apartment ownership also comes with shared responsibility.
“There is better governance whereby the Sectional Properties Act establishes an owners’ corporation framework.”
This structure ensures that all owners manage the property.
In the same context, Ms Mwende explains that most apartment developments are leasehold. Lease hold refers to the tenure of ownership rather than the document, while freehold ownership has no fixed expiry period, which is common for standalone houses. She notes that most urban apartments are structured as leasehold.
“Most developments in Nairobi are leasehold due to structure and investor considerations, especially for foreign investors.”
Off-plan purchases
Ms Mwende says that off plan purchases might have a higher risk because you are purchasing based on what the developer is telling you they will deliver. You are not physically verifying the property.
“Previous projects and delivery history are very important because they show whether the developer is likely to complete the current project successfully.”
Buyers should also pay close attention to contracts.
“We are very keen on the sale agreement because it governs construction timelines, payment schedules, completion obligations and remedies in case of delay.”
She stresses that timelines must be realistic and enforceable since construction projects can encounter unforeseen challenges, so contractual positions must be very clear.
“Apartment ownership may seem easier from the outside, but legally it is more complex than standard land purchases because you are buying within a larger development with shared rights, obligations and governance structures.”
Are apartments better than land?
“The answer is not straightforward because the two are sub-asset classes that present different opportunities depending on the investment goal,” Mr Denge says
He contrasts the two.
“Land remains one of the most reliable sub asset classes with data showing appreciation in double digits in markets such as Juja, Ruiru, Ngong, Kikuyu and Kisumu. Land also has long-term wealth creation with low maintenance costs, low entry barriers and the ability to hedge inflation. It requires prudence in investment to ensure you buy a good title.”
Apartments, however, offer income “An apartment guarantees medium-term cash flows. They say we are no longer making land, and this scarcity is what is driving value in land investment,” he says.
Mr Denge adds that he expects corrections in some markets.
“In the near term, we will see price correction in apartments, especially in mature markets, mainly driven by oversupply.”
