With the depreciation of the Kenyan Shilling against major currencies, including the United States Dollar, numerous business individuals are seeking strategies to safeguard themselves against potential losses. Notably, a segment of landlords in Nairobi has commenced requesting rent payments in US Dollars as the Shilling displays ongoing volatility. The media interviewed real estate agents in Nairobi to gain insights into this evolving trend in rent collection.
According to the findings, many landlords demanding rent in dollars own properties in upscale neighborhoods such as Westlands, Karen, Gigiri, Runda, Kileleshwa, and Muthaiga, among others. Shunguli Duncan from Rock Field Properties informed the media that the prevalence of landlords insisting on rent payments in Dollars has surged significantly in recent times.
Duncan explained that some property owners are expatriates who prefer dollars due to the instability of the Kenyan Shilling. Additionally, many foreign owners secured financing in another country, often in Dollars, to build their properties. By setting rents in USD, these landlords mitigate the risk of loan default, ensuring that the monthly rental income matches the currency in which they service their loans.
Modern 4 Bedroom Apartment for Rent in Westlands
For instance, if an owner pays USD1,000 per month for loan servicing, listing the house for the same amount in rent provides assurance of covering the loan repayment. Conversely, if the landlord were to charge Ksh163,000 per month and the Shilling depreciates, the converted amount may fall below the USD1,000 loan obligation, leading to potential default.
An anonymous real estate agent noted that many Kenyan landlords find this practice lucrative, benefiting from the depreciating Kenyan Shilling. Previously receiving Ksh139,000 for a house listed at USD1,000, they now receive Ksh163,000, anticipating potential increases in the coming years.
Addressing the issue of local tenants requesting to pay rent in Dollars, Shunguli emphasized its illegality and potential for financial losses. He clarified that tenants would need to set up Dollar accounts, and when converting the money back to Kenyan Shillings, they might receive considerably less. Shunguli further pointed out that individuals in the export and import business were the primary beneficiaries of charging rent in Dollars, as it allowed them to utilize their Dollar accounts for overseas transactions.
Read: From a Killing Field to a Thriving Investor Paradise: The Story of Witeithie