Welcome to SquareFoot Real Estate

Blog
  • News & Events
  • >
  • Opportunities and Challenges of Real Estate Agency in Kenya
November 06, 2019 / By Stephen Osomba
Opportunities and Challenges of Real Estate Agency in Kenya

Unbeknown to many, real estate agency is an old profession whose practice began in the early 1900s in the United States of America like many other things that trace their roots from the great land of opportunities. In Kenya, however, records indicating when the real estate practice took root are not available but the sector is believed to have started in the early 1980s as the Estate Agents Registration Board (EARB) Act was enacted in 1984. Other than being regulated by EARB which goes to demonstrate its maturity, the practice has inspired the establishment of higher education programs with University of Nairobi teaching a Bachelor's degree in Real Estate. The profession has since grown to become one of the major contributors to the country’s GPD which stands at 7% according to Kenya Economic Report 2018.

Indeed, real estate agency in Kenya has evolved to even greater heights and has created numerous opportunities along its various value chains. One of these is the real estate agency. A real estate agent sometimes referred to as a broker, is a person who sells and rents buildings and land on behalf of clients. They usually earn a commission for every successful sale that they close. The commission rates usually vary depending on the property value and the type of agency being sought i.e. letting or selling. For letting agency, the commission given by landlords in most cases is usually one month rent while for selling agency, the commission ranges between 1% to 3% contingent on property value. However, the agents may charge much higher rates if the property is located in far-flung areas or if it's a 'difficult' property to move. In some instances, clients looking for properties to let maybe charged space hunting fees. Otherwise in general practice, the agent is expected to source for clients and persuade them to lease or buy the listed properties.

The commission-based payment has provided numerous job opportunities for young professionals looking forward to establishing their careers in the real estate industry. According to a Gazette Notice dated 18th April 2019, there are 433 registered estate agents in the country. However, the number of practising real estate agents is much higher as the majority operate without the license. As many more people, including foreigners, invest in the country’s vibrant property market, the need for professional real estate agents will continue to grow. Already, the establishment of County Governments arising from the promulgation of the 2010 constitution has opened up new frontiers in property markets which now require additional real estate agents to facilitate those markets. While most agents are concentrated in Nairobi City County, the new property markets established across County headquarters will unlock new opportunities ultimately reducing the cut-throat competition being witnessed in the nation's real estate capital. Real estate industry in towns like Kisumu, Eldoret, and Nakuru is growing rapidly and will be fully mature in a few years thus ready for harnessing just in time.

Whereas there are numerous opportunities in the real estate agency, the practice is also riddled with copious challenges. The number one challenge perhaps is fraud in properties being fronted for sale. Sometimes it is difficult for agents to verify the authenticity of the ownership documents or projects details. Morris Aaron, a real estate agent in Nairobi says that he encounters many customers who question the legality of properties being put on sale and would like to know if they are ‘clean ’─do not have any blemishes. This is because some unscrupulous developers or property owners hide pertinent project information that would otherwise subvert a sale. As a result, agents end up convincing their clients into purchasing the property and regret immediately thereafter. This causes serious friction between the agent and the client. In most cases, by the time a client makes a purchase through a given agent, the level of trust and ties is usually very deep given the large sums involved in the purchase of real estate assets. The client undoubtedly trusts the agent and believes that they’ve received the best property advice and can then proceed to make a purchase.

Another challenge being faced by agents is clients, insisting on getting properties that they simply cannot afford due to their limited budgets. Derrick Samambo, a real estate agent with Samambo Housing, opines that most clients have not planned their real estate investment goals and they come to the marketplace to ‘window shop’ for properties akin to being in a supermarket which is a wrong approach to making real estate purchases. “Most prospect customers have not been pre-qualified to know their mortgage limit by the time they start shopping for a property or engaging an agent. Consequently, they end up wasting the agent’s time and their own time since the property they’ll like is way above their affordability,” quips Samambo. Real estate agency requires a lot of resources and given that they are paid in commission, it may be quite taxing when the clients waste time in viewing properties that they cannot afford. In some real estate markets, agents have been forced to demand bank statements before agreeing to take prospect customers for property viewings. This helps them sieve jokers from serious buyers. It’s usually a dicey situation for agents telling the clients the truth regarding their affordability.

Prospect clients have also been fingered by agents for bouncing property viewing appointments without any regard to inconveniences caused to the agents. There’s complete lack of courtesy on part of some prospective clients that has led to demoralized estate agents. This ties back to the issue raised earlier about clients not being ready for property purchase. Subsequently, today most agents have become strict in vetting the extent of seriousness by the prospective clients. Some measures adopted include calling before the appointment time, sending location pin so that the client can go at their convenient time or forwarding property images among other tactics.

Still, on client deviant behaviours, ducking of calls after viewing property is also a major headache for real estate agents. Native Kenyans have been known to be ducking follow up calls from the agents than any other category of clients. Most do so because they aren’t ready to buy or don’t have requisite money needed. So instead of being honest with their agents, they choose to play hide and seek till the agents get tired of following up. Others, though, would like to be pampered a little more before they come around to make a purchase, sort of ego-stroking. Amidst all this, unbeknownst to many, real estate agency can be quite expensive given all the independent logistics involved promoting and selling the property. Ideally, an agent needs a functional office, professional camera, listing website, marketing budget, and a car among many other tidbit requirements that will allow him or her to take clients to see various property listings available in his/her database.

In mitigating these challenges, there are now calls for independent/freelance real agents to form an association to promote the welfare of the professionals in the industry. Morris Aron, an agent-based in Nairobi is working on bringing together all agents across the country to form an association to simplify the agency practice through networking. Derrick Samambo, a real estate agent with Samambo Housing, on the other hand, suggests that established real estate brokerage firms need to support, lead, and train real estate agents to improve capacity and the general professionalism in the industry. Just like any other profession, the challenges abound but the practice of real estate agency in Kenya has a bright future and will continue to grow as the population increases triggering demand for both housing and commercial properties.

AUTHOR'S NOTE:
The views expressed here are of the author and do not necessarily represent the position of Square Foot Real Estate Ventures Limited and as such does not warranty any particulars.