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Real estate news.

Stamp duty rates in Kenya.

March 6, 2019

Stamp duty is an amount of money charged on several transactions such leases, transfer of properties, and securities.

Below are the rates for stamp duties according to the stamp duty act Kenya.

Transfer of real estate/landed property in urban areas costs 4% while transfer in the rural areas will have a 2% rate. When creating or increasing the share of the capital, the duty calculator Kenya charges a person 1% When registering a company with a nominal share capital, the amount is 0%.

According to stamp duty Kenya, when transferring marketable securities and unquoted shares one pays the rate of 1% An exemption for stamp duty charges is put on the transfer of quoted shares, and marketable securities. When participating in registration of mortgage or debenture, for collateral security, you will be charged 0.05%, while for extra protection it will amount to KSHs.20 per counterpart. Individuals who want to carry out a lease will part with at least 1% for the annual rents for three years, while for a period over three years, they will part with 2% of the yearly rent.

KRA stamp duty forms

All forms are completed from the Ministry of Lands and Housing. The quadruplicate is received upon the presentation of documents, which attract a stamp duty. The quadruplicate is handled by an agent, duty payer or advocate who takes it to either National Bank or Kenya Commercial Bank for payment. Bank charges are minimal and bared by the person paying for the duty. The money for the duty and amount for the bank is paid through either a banker’s cheque or cash.

After payment, the original copy of the payment form is retained by the person paying for presentation. The distribution of the document is such that :-

  1. The quadruplicate, which is yellow in color, remains in the bank.
  2. The triplicate, which is green in color, is forwarded to the registrar of titles and lands for record keeping.
  3. The duplicate is blue in color and it is forwarded to the Commissioner of Domestic Taxes by the bank.
  4. Finally, the original white copy remains with the duty payer.

Stamp duty act in Kenya

According to the stamp duty act Kenya, anytime you purchase a property, it is mandatory to pay revenue to the Government. Therefore, one needs to determine the the stamp duty of the property they are purchasing. Having a professional to advise is very critical in this exercise. Its a required that within 30 days of acquisition, all documents need to be stamped to avoid any penalties.

On the other hand, registered land acts and the land acts state that legal transactions involving mortgages, charges, transfers, and leases are not acceptable unless they have been duly charged. Revenue that is paid to the Commissioner of Domestic Taxes goes to the Government, hence failing to pay the amount is a criminal offense. As a citizen in this country, you need to know how to pay stamp duty Kenya. In cases where the paid amount exceeds the expected amount, application to get a refund should be made within one year. It is advisable to stamp all official documents since they can be used in a court of law in case there is fraud.

As stated above the amount of revenue being paid varies depending on the location and jurisdiction where a person resides. For instance, rural land attracts two (2%) percent of the value, while properties within urban areas attract a duty of four (4%) percent. The act for stamp duty in Kenya is clear that revenue for a mortgage is pegged on the secured amount. However, the legal land rates stand at two shillings for every KSHs. 1,000. Hence for instance, a mortgage going for KSHs five million attracts stamp duty of SHs 10,000. For leased property, the stamp duty is based on the payable rent every year. Currently, it is not possible to conclude a land transactions within 24 hours. Property valuation has to be done before a stamp duty collector endorses the property.

When there are issues of doubt in value of property,the stamp duty collector is at liberty to ask for valuation.

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Property Market.

January 24, 2019
Latest figures from the Kenya National Bureau of Statistics, covering July to September 2018, indicate that the property sector posted a growth of 5.8 per cent – its slowest rate since the 5.4 per cent recorded in the last quarter of 2014. During this quarter, sluggish demand forced some builders to offer huge promotions to entice buyers, including freebies and lower down payments. Interestingly, some developers slashed prices as much as 20 per cent, angering earlier buyers who paid higher prices.
 
Market pundits blame the slowdown on low access to credit, uncertainties in building approval laws, and a weakening purchasing power among potential buyers. “Demand is both constrained by oversupply in some segments and also due to would-be-buyers experiencing very limited access to credit,” Johnson Denge, whose company is undertaking real estate developments countrywide, said the market is experiencing an oversupply in the high end market segment, adding that developers must now look at new pockets of value to survive. “We have seen oversupply in areas such as office space, upper-limit residentials in select markets and also in retail space… Demand has slowed down and developers will have to look for new pockets of value, especially in the lower end of the market.”
 
Mr Ndege’s sentiments concur to those of Jared Osoro, the director of research and policy at Kenya Bankers Association, who says subdued demand for housing among the middle-and high income earners has made it difficult for investors to repay their bank loans. “The situation reflects subdued demand on the back of continued investments in the housing market, which remained skewed in favour of the middle and high-income bracket,” Mr Osoro said in a recent interview.
 
The Central Bank of Kenya’s Quarterly Economic Review released last month shows that real estate recorded the highest growth in non-performing loans in three months ended June, a situation that has seen a spike in the asset seizures by aggressive lenders. Non-performing loans in the sector rose by Sh6.1 billion, or 15.8 percent in April-June to Sh44.4 billion compared to the previous quarter as developers outpaced manufacturers (11.7 percent) and traders (7.3 percent) in growth of default on loans, the CBK said.  This means that 11.3 percent of the Sh392.7 billion gross loans extended to investors in land and houses by commercial banks over the years were not being serviced as at the end of June.
 
A loan is considered non-performing if it remains unserviced for more than three months. As a result of financial difficulties, many investors have lost their properties to creditors – leading to an increase in number of repossessed homes that are being sold off cheaply across the country. The slowdown has negatively impacted the local construction industry where cement consumption for the 10 months to October 2018 declined 6.4 per cent to 4.129 million metric tonnes compared to a similar period in 2017.
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Property Valuation.

January 4, 2019

Why Property Valuation?

Well, although you may not be looking to sell your property yet, getting your property evaluated will help you gain important information about your property. In fact, a property valuation can be  helpful in knowing the actual worth of your principal asset.

Planning for a Renovation:

When you want to consider a renovation project for your home such as adding a new pool or backyard area or home interiors, a property valuation becomes imperative. Property renovation process can get costly and it is essential to keep an eye over the budget so that you don’t overcapitalise (for instance, it’s not a wise decision to add a modern swimming pool to a house property that is having a low resale value). You can get your property valued from a reliable property valuer and ascertain the accurate value of your property.

Buying a Second Property for Investment:

If you want to buy a second property just for investment purpose then your equity in your primary property can act as the collateral for the purchase. Generally, banks will lend over eighty percent of the purchase price of an investment property when you use your property as collateral. A property valuation will let you know how much equity you possess in your property, and accordingly how much loan you will be able to acquire for buying your second property.

Refinancing Your Primary Loan:

If your home property is mortgaged and your original loan term is ending or you’re looking to switch products or lenders, a property valuation becomes crucial. Depending on the lender and your own preference, a property valuation can be performed either through a property valuer of your lender’s choice or a third party. You may want to switch to a loan product that provides a lower rate of interest that could result in significant savings eventually, change an interest-only product for a principal and interest arrangement. Property valuation will give you grounds to discuss better terms with financing institutions.

Oftentimes, real estate market experiences a notable growth, which means likelihood your home/property may have accumulated value. In case, your home/property hasn’t accrued value, once you know your its value, you’re in a better position to make financial decisions moving forward. In addition, a valuation will facilitate you to make a will that hands-out your property as per your wishes.

You can opt to have an informal or formal property valuation depending on the purpose of the valuation. If you just want an estimate to know your property’s net worth or find out whether selling would benefit you financially, a real estate agent can normally provide you with decent approximation about your home property’s value on the open market, for more accurate estimate and advisory contact a valuer. If financial institutions need to perform a mortgage or refinance, they will organise valuations.

Finally and importantly, you can also hire an independent, qualified property valuer for evaluating your property.

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