Building versus buying: Why you are better off constructing

Owning a home not only does it consume a big chunk of your money, it also demands a lot of time and energy, so you must get it right. PHOTO | SHUTTERSTOCK

What you need to know:

  • Despite the appeal of the prices of these ready-made homes, that often have a monthly payment plan method, Mr Gitau, who is the Chief Executive of Peter’s Plots, says that buying a ready house is a bad idea. 
  • He notes that when an individual buys a house, more so under mortgage, they lose money in the long run.
  • Just start with what you have and build up from there at your own pace. Once your home is complete, you will realise just how much you will have saved.

Investing in owning a home is among the most significant and critical investments that an individual can make in their lifetime. Not only does it consume a big chunk of your money, it also demands a lot of time and energy, so you must get it right.

Like any major life decision, acquiring a home is a very personal matter, hence, it demands serious decision-making and patience, otherwise you may end up making mistakes that could cost you dearly. 

A significant hurdle to owning a home, which is perhaps a testimony that most homeowners can attest to, is making the ultimate decision whether to buy or build a home. The decision can be quite involving, and although both options have their individual perks and flexibilities, real estate developer Peter Gitau is convinced that you would rather build from scratch than buy.

Looting schemes

Ideally, a significant number of people, more so in urban areas, like Nairobi, buy ready-made homes such as bungalows and apartments in gated communities to avoid the daunting task that comes with building a house. This does not come as a surprise since the process of acquiring land as well as evading endless looting schemes by suppliers and masons is quite exhausting.

Due to this, more people are starting to prefer going for ‘house shopping’ until they find something that fits their dream home. This trend has been observed in the past decade where there has been an increasing number of developments for sale, more so in affluent areas such as Kileleshwa, Westlands, Syokimau, and Athi-River.

Despite the appeal of the prices of these ready-made homes, that often have a monthly payment plan method, Mr Peter Gitau, who is the Chief Executive of Peter’s Plots, says that buying a ready house is a bad idea. 

He notes that when an individual buys a house, more so under mortgage, they lose money in the long run.

“What most people are not told is that buying a ready house is a bad idea because you may pay up to six times more than you could have had you built it yourself,” he says. If you own land, you’d rather take four years building your dream house than buy a ready one, whose cost is usually exaggerated. 

Apartments for sale in Nairobi range from Sh3 million to Sh5 million for two bedrooms and Sh7 million and above for a three-bedroom apartment. However, depending on the location and size of the house, this figure could soar up to Sh150 million. 

A significant concern for homeowners is usually to find a home that offers tranquillity, but also offers features such as security and accessibility, a need that home developers are aware of. In most cases, people are pushed to buy homes because the developer offers these features, which are usually in gated communities that have an administration plan and structured security. 

A significant advantage is that gated communities are also supplied with accessible roads and other essential amenities that home buyers need not worry about.

Building a home may not necessarily offer these amenities, particularly features such as security and accessibility as they are often located in remote areas. This is one of the factors that discourage an individual from building their home. 

However, Mr Gitau argues that these are inconsequential issues that can be easily resolved as they do not compare to the cost that a person would incur if they chose to buy a ready house in a gated community. 

“These are minor issues compared to spending millions more on a ready house. There are ways that one could work around issues of security and accessibility such as collaborating with neighbouring home owners to form a gated community. 

This could comprise of six to 10 houses whose owners collaborate to put up a fence, facilitate security costs and other critical amenities,” he says. 

Mr Gitau stresses that not only does building a home from scratch provide a homeowner with the freedom of choice and flexibility in design, it is also much cheaper in the long run. He notes that the return of value in a home you put up yourself are far more significant than ready homes.

“Would you rather spend Sh30 million on a three-bedroom house along Kiambu Road or spend Sh12 million building a house reflecting your own style and fashion? What people need to be aware of is that getting your dream house requires patience and technical knowhow. That way, you save lots of money,” he says.

The real estate developer with more than 15 years of experience in the sector further notes that the current prices in real estate are highly exaggerated, with developers setting very high prices on properties.

This, however, is to be expected as developers are in business, and therefore seek to make profits, a trend that will most likely continue.

“A developer will use Sh5 million to build a house or apartment and sell it for Sh30 million. There are no laws and structures governing the real estate industry, hence every developer is setting their own prices, which will eventually become a problem as people will not be in a position to afford these houses,” he said.

A look at Nairobi’s real estate industry shows a worrying increase in the number of empty stores in new malls as well as a high number of unoccupied office spaces in recently developed complexes. Although the industry has seen a tremendous rapid growth rate over the past decade, developers are starting to struggle to sell houses and renting spaces. Although constrained credit access, particularly for buyers of properties, could be attributed to this, part of this downward trend could also be due to an oversupply of properties, especially in areas such as Upper Hill and Westlands, which has consequently scaled down the demand for these properties. 

However, an ironical tend is that the prices of properties are not going down.

Mr Gitau explains that putting up developments is not the problem, rather, selling off to recoup your investment. 

“The housing need is far from being met, but we are not having housing development that’s affordable to the very masses that need it. The prices must be readjusted to make the property affordable,” he argues.

Unsafe mortgages

Reports indicate that there are currently only 12,000 active serviced mortgages by homeowners each month. This is against a demand population of over 20 million people. With an increasingly tightening economy as well as a highly unstable job market, most homeowners with mortgages are finding it extremely difficult to service their loans.

This is particularly dangerous in a country such as Kenya, where there are no specific laws that protect people who are servicing mortgages. 

Mr Gitau says that due to lack of laws on mortgages, a homeowner’s investment may be lost if they fail, for one reason or another, to make their payments on time.

“There are no laws to protect mortgages in Kenya. If an individual who is on mortgage loses their job today, the bank should consider the client’s payment track record of say six years, and give him a considerable grace period of at least six months to look for another source of income to continue servicing the mortgage.”

He argues that there should also be an insurer who pays a holding amount until the mortgage holder is able to resume payment again. 

Instead, what happens is that if one does not pay the agreed on sum for three consecutive months, the bank auctions your home, and with it, your six-year investment is gone.

Also worth noting is that the current policies on mortgages do not protect the homeowner, where in many cases, those under mortgage payment lose their homes and investment upon delayed or missed payments.

“The government should establish policies that protect homeowners, otherwise, in the long run, a majority will be left without a roof over their heads.” 

No doubt, source of capital is a significant issue when considering building a house. However, the principal investment is often not a challenge, rather, knowledge of what the individual wants.

“Having the right knowledge is critical in building a home, with research playing a significant role in every step of the building process. 

If you own a piece of land, you can start building with only Sh50,000. This is enough for excavation in preparation for laying the foundation,” he says.

“Just start with what you have and build up from there at your own pace. 

Once your home is complete, you will realise just how much you will have saved as opposed to how much you would have spent if you were to buy a ready house,” he adds.