Lots of entrepreneurs are trying to hedge their bets against potential losses as the Kenyan shilling falls in value compared to other currencies like the US dollar.
Because the Shilling is still showing indications of instability, some Nairobi landlords have begun requesting rent payments in dollars.
The changing trend in rent collection is something that real estate brokers in Nairobi should be aware of.
Westlands, Karen, Gigiri, Runda, Kileleshwa, and Muthaiga are just a few of the wealthy areas where the majority of landlords are seeking rent in dollars.
According to Shunguli Duncan of Rock Field Properties, the tide has turned in favour of landlords who insist on paying rent in US dollars.
Expats make up a small portion of the owners. He elaborated by saying that the volatility of the Kenyan shilling is the reason why they pick dollars.
According to Shunguli, the majority of the foreign owners had taken out loans to develop their residences via financing agencies.
They would rather have American money sent in, as the loans were usually taken out in another nation that charged dollars.
According to Shunguli, CEO of a leading real estate firm in the nation’s capital, this protects landlords from the risk of loan default.
According to him, the homeowner may confidently market their home for the same amount as their monthly loan payment (USD1,000) and still be able to pay it back.
“Assuming the landlord chooses to charge Ksh163,000/month, he may easily convert that income to pay off the $1,000 loan. Next month, the Ksh163,000 might be worth USD950, which could result in a debt default if the shilling continues to fall. “
A second estate agent, who preferred to remain anonymous, made the observation that the practice was quite profitable for many Kenyans.
“I know local landlords who are cashing in big time on the falling value of the Kenyan shilling. For a residence advertised for $1,000 last year, they would have received Ksh139,000 after conversion.” “Right now they get Ksh163,000, and next year that amount could go up,” she stated.
When asked about the problem of local renters charging dollars, Shunguli said that it was against the law and may cause financial harm.
They must open a dollar account before anything else. He elaborated that one thing many don’t realise is that the amount you’ll receive when you convert it back to Kenyan shillings is much lower.
Those involved in export and import were the ones who benefited from renting in dollars, he said.
The reason this is beneficial, as Shunguli explained to Kenyan landowners, is that they may use their dollar accounts to buy items from outside.