Personal Finance

Allure of Dubai for Kenya's real estate investors

dubai

An aerial view of Dubai. PHOTO | COURTESY

Dubai’s property market boasts a world-class infrastructure and a regulatory environment that ranks among the best in the world—drawing wealthy global investors.

Deep-pocketed Kenyans have not been left behind, with their growing appetite for luxury homes in this port city revving up marketing excursions in Nairobi.

According to Dubai-based Danube Properties, most Kenyans seeking luxury apartments want holiday homes as well as residence for family members attending college. “Some also seek to own fully furnished homes as an investment that can be leased to other Kenyan families visiting Dubai for holiday,” said international property consultant Alice Maigida.

Ms Maigida said they decided to open clients’ business meets in Kenya following heightened interest that saw several Kenyan families directly engaging their firm to buy apartments.

“Kenya is emerging as an important market for us where affluent families are buying apartments to facilitate residence for their members pursuing an education or to house business partners who often visit Dubai,” she said.

Danube’s Arslan Arshad says they have sold five properties to Kenyans in the past one month which prompted them to hold a second clients’ meet in Nairobi to maintain the sales tempo.

“We have new properties coming up and are eyeing off-plan buyers keen on cashing on the growing interest in Dubai real estate,” he said.

Ms Maigida said Dubai’s laws facilitated tax-free purchase of property and an automatic issuance of two- year residency visa for buyers and their family members. “It is automatically renewable after every two years and the Dubai government is actively involved in every step of construction where their task is to ensure the building is up to the required standard,” said Mr Arslan.

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He said all payments made upfront were received by the Dubai Lands Office that registered the buyer’s interest and issued a title deed on completion of payment.

“As a developer, you never touch the buyer’s cash until you have delivered on the project. This ensures all transactions are above board,” he said.

In the past 25 years, Danube has invested heavily in the construction materials industry and recently opened a property development division targeting affluent global citizens seeking to invest in Dubai’s real estate sector.

An earlier report by Real Estate and Wealth Publisher, Knight Frank that partnered with Standard Bank— which owns Kenya’s CFC Stanbic— said Dubai is a favourite investment destination after UK where 25 per cent of Kenyans invest in real estate.

The bank’s Wealth and Investment’s Head in charge of Africa, Deon de Klerk, said heirs who became billionaires at a young age were now mostly global citizens. Mr Shirley explained that with a lot of these children studying abroad, they have acquired global exposure and are more open to opportunities out there. Last year, the number of Kenya’s super rich rose to 9,400, representing an eight per cent growth from 2015’s total of 8,500, among them 30 individuals whose assets are valued at more than Sh1 billion, 10 ultra-high-net-worth individuals (HNWI) with more than Sh3 billion each and two cent a dollar millionaires with more than Sh10 billion each.

Knight Frank’s 2017 wealth report shows that Nairobi’s population of the super-rich grew at the fastest rate in 2016, beating Uganda, Tanzania and Rwanda.

The realtor said 30 per cent of affluent Kenyans hold their property portfolio abroad, mostly in the UK.

The firm, which deals in global sale of high end private residences and commercial properties, said those investing abroad were Ultra High Net Worth individuals with Sh2.8 billion or more.

The report said dollar millionaires are considered those with primary assets such as homes and a liquid portfolio of over Sh102 million, with 44 per cent of Kenya’s super rich looking abroad for property investments.

“Europe was the most preferred foreign market, accounting for 53 per cent of the locals looking to invest in commercial property abroad, with North America and Middle East taking up 12 per cent and six per cent respectively,” it said.

The report noted that Kenya’s super-rich typically own up to three homes (primary and second ones) on average, much as their global and Africa counterparts with majority eyeing homes in Europe (74per cent),North America (16per cent) while five per cent have bought houses in the Middle East.

Wealthy Kenyans eyeing real estate abroad prefer buying furnished apartments but millions of shillings have also been invested in mansions, maisonettes and villas in some of the world’s top cities such as London, Mumbai, Durban and Cape Town which become their holiday homes or international real estate investments with high returns.

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Dubai’s largest developer, Emaar Properties, has been promoting its three properties, notably The Address Residence Sky View, Burj Vista II and The Hills where the price starts at Sh66 million for one-bedroom units.

Damac Properties, Deyaar and Seer Acquisition, all from Dubai, have pitched tent in Kenya while India-based Unesta recently opened an office in Nairobi to promote house sales in that country.

The Knight Frank report adds: “Most rich people value privacy and understandably, prefer to keep information about their investments and assets to themselves.’’

Commercial law practitioner Jacqueline Munyaka says wealthy individuals prefer to invest abroad to reduce their tax liability as Kenya’s rates are high when compared to other countries and to maintain a high level of secrecy.

Countries like the British Virgin Islands and Seychelles have strict secrecy laws that prohibit revelation of asset ownership details to the public, making them attractive to investors who want to stash away their wealth.

The British Virgin Islands, for instance, collects over $200 million (Sh20 billion) in corporate fees every year, which motivates its government to maintain the status quo as regards to business operation and asset ownership. “Taxes are huge in Kenya while countries like Seychelles are easy on taxes. Also, company records are open in Kenya and for you to discover capital, transactions or ownership of a local firm you only need to apply to the Registrar of Companies,” says the Munyaka & Company Advocates Managing Partner.