There has often been a constant debate over the benefits of either building or buying a home. Some home-owners prefer the faster and immediate option of buying a complete structure. On the other hand, some prefer to build a house from scratch.
There are a number of things to note before settling on any of the two options. First on the list is money.
Buying
A home-owner has to have sufficient capital in order to actually buy a house. If the person has a lump sum that will cater for all the necessary expenses, then the worst part is over. If not, the buyer has to take a mortgage. Mortgage lenders like Housing Finance and KCB cover up to 90% of the expenses.
One of the biggest conveniences of buying a home is that is saves time. Looking for a home may take a while but once you find the one you want, it’s only a matter of putting down a deposit for a mortgage or making a full payment. On the other hand, building takes time.
Buying a house also provides the home-owner with fully-fitted drainage and electric systems. As long as the house was built according to City Council regulations, it will have access to water and power. Some rural or remote housing projects lack these facilities.
For instance, A 4 bedroom house on 1/4 of an acre in Donholm can cost about KES 20 million. On top of this, there are Commitment, Valuation, Legal and Syamp Duty fees which cost 7% to 9% of the property value. Assuming a buyer can afford a lump sum payment, then the total cost of the house would be about KES 21.8 million.
If that is not the case, current mortgage rates range between 16% and 28%. If a home owner was charged at an average rate of 20%, he would pay KES 39.7 million for a mortgage period of 10 years.
Building
One of the benefits of building your own home is the fact that the plan can be customised. Home-owners get to choose how the structure will look. They can opt for high ceilings or wider rooms as long as their specifications meet the basic construction requirements set in place by City Hall.
What’s more, building a house doesn’t have to take months to complete. Building has the option for prefab housing which can take less than a week to put up, depending on the type of house and the construction crew.
Building a home in Kenya requires at least 6 basic requirements that have been set in place by City Hall. Potential home-owners must have:
- Proof of ownership
- A Registration certificate from the architect
- A registration certificate from the structural engineer
- Approved application forms from the Municipality and City Hall
- Blueprints for the house plan
- The latest annual land rate receipts
On top of this, the potential home-owner is expected to pay for registration and application forms. Based on data from the International Finance Corporation (IFC), this can cost no less than KES 65,000 and can last for up to 4 months.
However, in 2011, the City Council launched an electronic construction permit system which allows them to review and approve building plans online. The system, which was developed with the help of the World Bank, is the first of its kind in Africa. According to the Construction Business Review, it enables architects and contractors to save time that would otherwise be spent waiting for building plans to be approved.
The Review also notes that the system will reduce corruption since there will be no need for bribes. The automated process ensures that there is barely any need for actual human contact unless the home-owner needs to physically collect the permit. So the application process may take a few weeks or a month at most.
A ¼ acre plot in the same area can cost up to KES 4 million. This means that the pre-built house costs KES 16 million.
If someone wants to build a house using that much money, the Kenya Homes Guide notes that they only need to consider the square footage of their house plans. Instead of calculating the cost of labour, cement, wood and other building materials, one can simply count the square footage of the proposed structure.
A 4 bedroom house is about 1300 square feet. Dividing the cost of the house by the square footage gives an estimate of how much it would cost to build a similar structure. In which case, building such a house would cost about KES 12,300 per square foot. The home-owner can choose to reduce the size of the house plans to cut costs.
For instance, choosing 1000 square feet would cost KES 12.3 million. Adding the cost of the land, this would give rack up expenses of up to KES 16.3 million for a lump sum payment.
According to the 2012 quarter 1 Hass Consult Property Index, buying the house on a construction mortgage would cost 24.5 million after a 10-year period.
Below is a table showing how much it would cost to either build or buy the 4 bedroom house against taking a mortgage rate of 20% for a 10 year time-frame.
| Buying | Building | |
| Land Cost | KES 4 million | KES 4 million |
| Current Value of the House | KES 20 million (land included) | KES 20 million (upon completion) |
| Legal, Permit + Other Expenses | KES 1.8 million | KES 1,865,000 |
| Construction Cost | Not Applicable | KES 12.3 million |
| Mortgage Rate | 20% | 20% |
| Mortgage Period | 10 years | 10 years |
| TOTAL EXPENSES | KES 39.6 million | KES 24.4 million |
Based on research from Hass Consult, one of the biggest Real Estate firms in Kenya, both properties would be worth KES 60 million after 10 years.