For some strange reason, almost everyone in this country thinks plots are the best investments available – advertisers and property dealers have propagated the notion that ‘one can never go wrong in owning a plot.
To Mrima people, the base word is ‘mburoti maguta maguta’. As a result, the majority of the people have sunk millions in plots that are either dead investments or outright scams.
Today, I share some thoughts and things to consider before you sink your millions into a plot:
1. Land dealings in Kenya are highly invested by scammers and sweet talking cons – plots business has attracted a lot of fraudsters because the majority of Kenyans are very careless when buying land. The false belief that one cannot go wrong on plots completely ignores the risk assessment part in land investments;
2. Remove emotional and cultural stereotypes – like any other investment option, plots and land deals must be evaluated based on their investment worth and not your cultural beliefs on land;
3. Remove group think or herding behaviour when looking for a plot – many people buy plots simply because their friends, colleagues or chama members are buying. Unfortunately, Saccos have also lured their members into dead investments with highly speculative land deals where only the officials benefit and then leave their members stranded with useless investments;
4. Establish if there exists an economic value underlying the plot -other than pure speculation, plots are reliant on an underlying economic activity to increase in value. Simply because a road, electricity, water or SGR is near the plot does not make it a good investment. Instead, ask yourself what business or trading activities happens around that area that can attract people, investors and levels of income in that locality of the plot;
5. Land value does not increase indefinitely – it is true that the people who got into land business at the start of President Kibaki era economic expansion made millions for themselves and many people got good properties. But with economic stagnation during the Uhuru and now Ruto governments, the better days in land dealings are mostly behind us;
6. Speculators and brokers ‘eat’ most would be gains in plots – even for potentially good plots, speculators and brokers overprice them and make it impossible to recoup any meaningful profits after them;
7. Using a loan to buy a plot is mostly financial suicide – any loan borrowed for a plot ‘eats’ future profits through the interest and other loan processing costs on top of the actual price paid to the seller. To know the actual costs of your plot, include the loan costs;
8. Associated costs after owning the plot – plots owned far away or in remote places will require additional costs when going sightseeing, fencing or frequent visits to protect them from grabbers. Most people ignore this costs at the time of buying, only to face the reality too late after the deal is done;
9. Lengthy return period -while plots look good on the face value, most plots will take a long time to ever gain value that can be cashed as profit. For speculators, this my tie your capital for far to long unnecessarily; and
10. Most plots will require additional huge capital investments to activate the economic activity behind them – unless yours is for pure speculations, plots demand more capital to start generating actual cash after buying them. Many people have to wait for eternity to raise this additional capital, further dragging the payback period.