Common Investment Mistakes by Foreign Investors
Kenya presents significant opportunities in real estate, but foreign investors entering the market can easily make costly assumptions. Experience in another market does not automatically translate into success in Kenya. The development environment, approval processes, construction costs, market behaviour and stakeholder relationships require local understanding.
Here are four common mistakes foreign investors should avoid.
1. Assuming Kenya Means Everything Is Cheap
The perception that Kenya is a developing country and therefore property development must be inexpensive can lead to unrealistic budgets. The danger is starting with an assumed construction cost and then forcing the project to fit it.
Land, construction materials, professional services, imported equipment, logistics, statutory requirements and financing can all represent significant costs. Imported materials and specialised systems can be particularly expensive. Even where labour costs are competitive, this does not necessarily make the overall development cheap.
2. Assuming Development Timelines Will Follow Those in Their Home Country
Foreign investors sometimes arrive with a development programme based on how quickly similar projects move in their home market. This can create problems.
A Kenyan development programme must be based on Kenyan realities, including approvals, procurement, construction practices, stakeholder coordination and other factors that affect delivery.
3. Relying Too Heavily on What They See or Hear About Government
Government can play an important role in enabling real estate investment, but investors should be careful about treating public statements, social-media posts or informal assurances as guarantees of what will happen to their project.
There is a significant difference between an investment being publicly encouraged and a specific development having obtained the approvals, rights and statutory clearances required to proceed.
4. Forcing Market Circumstances to Be a Replica of Their Own
Perhaps the most expensive mistake is assuming that a successful real estate concept elsewhere will automatically work in Kenya.
A development can be technically sound and still fail commercially. Location, purchasing power, tenant or buyer preferences, unit sizes, pricing, amenities, competition and the surrounding development pattern all influence demand. Foreign investors can also underestimate how long it may take for a new concept or development model to gain market acceptance.
All these mistakes can be addressed by having proper local representation.
Using a local contact merely because they are familiar with the country is not enough. The investor needs competent professional representation with responsibility for the development process.
In conclusion, you can have extensive experience developing property elsewhere but still encounter difficulties navigating the Kenyan market alone. All the planning nitty-gritty require someone who is well grounded in local information and has a proven record of coordinating these factors.
Using a local contact merely because they are familiar with the country is not enough. The investor needs competent professional representation with responsibility for the development process.
For more information, reach out to us via info@rickfes.co.ke
At Rickfes Construction Ltd., our Real Estate Development Advisory service supports foreign and diaspora investors tfrom assessing the opportunity and validating the concept to coordinating the technical, commercial and local considerations required to move towards implementation.
