@FundamentAli,

First,why does every tom,dick and whoever want to ursurp the roles of valuers.........aaarrrggghhhh clearly we are a failed state!!!

Having looked at your scenario Funda...,i would like to totally disagree with you.

Here are the basic basic definitions to help you differentiate Market Value from Insurance Value.

Market Value is the estimated amount for which an asset should exchange on the date of appraisal between a willing buyer and a willing seller at an arm’s length transaction after proper marketing wherein each of the parties had acted knowledgeably,prudently and without compulsion.


Insurance Value is the estimated replacement or reproduction cost assigned to a property to provide protection against risks such as fire,floods,theft etc. It is arrived at through the gross replacement cost approach.





The gross replacement cost of a building is the estimated cost of erecting the building or a modern substitute having the same gross built up area as that existing at prices current at the relevant date.



This figure would include professional fees,any irrecoverable value added tax and any other associated expenses directly related to the construction of the building,such as foreign exchange movement and exposure for imported components (if any). However,insurance value does not include the cost of land and is only concerned with the improvements thereon.





Having considered the above definitions let me go ahead to water down your scenario.





A house in Kahawa Sukari which cost 30 Million to put up is wonderful,magnificent!!! We are talking about 10,000 Sq feet (929 Sq Metres) worth of construction using a gross replacement cost of Ksh3,000 per sq ft. No developer would put up such a development and sell it for less than 45 Million factoring in Land and his profits. Consequently,no valuer worth his/her salt would value such a house at a market value of Kshs 15.0 M as you put it. Clearly the market comparable would be the 45.0 M.



Substitute the above with Kileleshwa and you still come to the same conclusion.





Hope i have shed more light and put to rest this issue which no one in this forum seemed to have a clear explanation.

@ Mukiha,

Quite thoughtful. Your fears are real. It is possible that you can still insure your flat against the thought out risks though.

But first,let me clarify that the idea of flats is relatively new here in kenya having been introduced around 1987. Thus,the legal technicalities regarding ownership are evolving and hopefully will be ironed out in the near future. Ownership of flats is by way of subleaseholds with each unit owner having a share in the management company which owns the reversionary interest in the land. What this means is that all unit owners have a common interest in the property and so you are bound by the rules and regulations in the subleasehold.

When it comes to insuring your property there are two scenarios here in Kenya.

1. You can insure your individual unit and care less about the rest.

2. The management company set up by the unit owners can agree to insure the whole property with each unit owner contributing a small portion of the insurance premiums through a levy called service charge and then you insure the property as a whole.

The most common here in kenya is the 1st option. For the second option i only know of one property here in Nairobi where the owners have actually agreed to insure their property as a whole. Never mind that Kenyans will rarely come up to an agreement.

To cap all this and help members understand this concept of flats,well let me end by saying that the ownership concept in flats is borrowed from the provisions of the Sectional Properties Act No. 21 of 1987 which provides for ownership rights to a unit within a multi tenancy property development without exclusively owning the land on which the property is situated. The land,common areas and infrastructure usually refered to as ''common property'' are collectively owned by all unit owners of the development. As a result every unit owner/ occupier automatically becomes a member of the community and is required to abide by certain rules and regulations which do not usally apply in a full title house ownership.

Finally,hoping that this will not add salt to the injury,for those who thought that buying flats for owner occupation is a way out,well it is a means to an end but the hard reality is that,you are only a tenant for a verrry loooong time!!