Home | Kenya Real Estate | Dangers of Buying Land Plots for Speculation

Dangers of Buying Land Plots for Speculation

Font size: Decrease font Enlarge font
Plots for sale in Kenya Plots for sale in Kenya

“This plot is costing Kshs 1 million in about 4 years it will have gained value to Kshs 5 million, you will make Kshs 4 million!” Land speculative sales pitches are the driver of Kenya economy today. The potential buyer thereafter is offered a plot loan 70% for 48 months by a bank. The person then puts in Kshs 300,000, borrows Kshs 700,000 to repay in 48 months, and the land becomes held for speculative purposes to make Kshs 5 million at the end of 4 years.

Land as created by God was meant for production of the needs that sustain daily living and not to be held idle for speculative purposes or storage of wealth purposes. The only things land sub-divided for speculation purposes lead to are: Contribution to hunger, Bad settlements and higher costs of living.  

Land speculation was one of the biggest businesses in the U.S in the late 1800’s and early 1900’s. Some say colonization was fueled by land speculation based on notion that land value will continue to rise. Some economists have even argued that it was one of the contributors of the 1929 Great Depression. The argument based on Kenya today would go like this: “Let’s consider that 500,000 plots of diverse sizes are held for speculative purposes rather than production; if these plots were productive in food or housing persons living in slums and hungry would not be in slums or hungry.” 

Kenyans living abroad are considered the biggest contributors to speculation today. Today 200,000 Kenyans living in the U.S and working based on U.S average per capita income of $50,000 could have a financial resource of $10 billion. Off-course 80% of this will go to their consumption needs food, housing and other bills. 20% that they have extra is the targeted opportunity for land speculators. Today one may not be surprised to hear one holding 5 or even 10 plots that stay idle day in day out as they build their land speculation portfolio. 

 Indeed, corruption in land offices, can also be blamed on land speculation. As population increases the demand of land for production to sustain life increases making a land that is idle a target for production use. Many a time files are altered and those abroad who bought land for speculation swindled. If this land was sold for developed into a house and house was developed and someone lives inside the property, the file would never be hard to alter.   

The good thing is that today Kenya Constitution has several laws that can make land productive. The other good thing is one law is directly under County government. County residents can use constitutional power article 209 (3) “A county may impose— (a) property rates,” to make land productive by land paying a property rate.

Based on the global common rate of 1% of value, when someone holds land property that they advertise for sale at Kshs 100 million, the land would pay a property rate of Kshs 1 million an year to county. This property rate will enable land become productive for the land would at the end of the year be required to pay property rate. 

The biggest danger today is the rise of land speculation to 1 million plots made up collectively as 5 to 10 million acres held for speculative purposes and at an average of Kshs 1 million have a speculative value of Kshs 1 trillion. The wealth could be owned by say: Diaspora Kenyans 20% or Kshs 200 billion, Kenya banks holding public money 60% or Kshs 600 billion and Kenya public Kshs 200 billion. If the economic systems cannot support this speculation that is the cause of high cost of living as millions of acres of land are held unproductive then the economy could collapse and this speculated wealth lost.  

It is time that land speculation ended and land transactions done purely based on land production. The statements that should come from buyers are: I’m buying to build a house! I’m buying to produce food! I’m buying to develop an industry. County Governments will eventually pass laws that require land property sold be accompanied with a usage economic plan before sub-division and transfer.  

Once this happens a person who bought 500 sq m of land at Kshs 1 million speculating a Kshs 5 million will have a rude awakening after paying Kshs 1 and another Kshs 700,000 in interest to only see the land value decline to even Kshs 500,000 thereby losing Kshs 1.2 million in 4 years rather than gaining Kshs 4 million speculated.

  • email Email to a friend
  • print Print version
  • Plain text Plain text
No tags for this article
Rate this article