How to Apply For a Construction Loan in Kenya

The process of applying for a construction loan in Kenya will cost you not only time but also a considerable amount of money.

You see, the bank won’t be paying your project manager, architect, civil engineer, quantity surveyor, or other project consultants. You’re required to appoint them in advance, and then have them use their project documentation to apply for the construction loan.

Ok, I know. That sounds quite risky. Because what happens if the application is declined?

Well, technically, you’ll still have your building plans with you. And those alone are great assets. At least you can pick up from there in the future once you secure sufficient funds for the construction project.

Anyway, that aside, a thoughtful way of minimizing the risks here is approaching the bank beforehand. Get in touch with a loan officer and discuss your financial situation plus the proposed project.

They’ll then assess your creditworthiness based on your specific needs, after which they’ll advise on the loan amount you can comfortably afford.

A word of caution though. Don’t go for the highest possible amount. Rather, focus on the lowest amount you need to complete the construction project. You can ask for a detailed schedule of the repayment rates and durations to compare the variables across different loan amounts.

Then once the bank gives you the green light, you can begin appointing your construction professionals.

Now, this is where things get a bit confusing for most people. And here’s the problem…

By now I bet you know that you’ll need an architect, project manager, civil engineer, quantity surveyor, and a building contractor. What might not be clear, however, is the appointment plan and sequence.

So, who exactly should you hire first and which parties should come next?

Well, in most cases, the architects come first and then the rest follow after the building’s concept and design have been adequately thought out and drafted.

However, people who prefer a more holistic approach usually appoint lawyers and project managers before proceeding with the standard sequence.

The reason is, your lawyer will act as the legal administrator of every single agreement you sign with each party. Then the construction project manager, on the other hand, will advise you on all the project parameters, as well as guide you accordingly through every single phase of your building project.

At this stage, the construction manager will give you the gist of the possible costs involved, all the professionals you might need, the construction time estimates, the legal requirements, plus of course, the potential construction challenges you should expect along the way. And if you’re dealing with a large project, they’ll even conduct a comprehensive feasibility study, complete with the accompanying long-term projections.

With that sorted out, you can go ahead and appoint a licensed architect, who’ll design your building based on your specific preferences. The architectural design should subsequently be forwarded to your appointed civil engineer, who’ll then come up with the corresponding structural design.

Other design professionals you could engage at this stage include; interior designers, landscape architects, mechanical engineers (for the plumbing layout design), electrical engineers (for the electrical layout design), etc. Your construction project manager can guide you accordingly.

And once the design process is done, submit the architectural and structural drawings to the county authorities for approval.

But, it doesn’t end there. After the county government approves your construction project, you’ll be required to get in touch with other relevant bodies like NEMA and NCA for the final approvals.

In the meantime, you should engage a registered Quantity Surveyor in Kenya for an in-depth cost analysis of the entire project. The bank will need a detailed bill of quantities as prepared by a fully licensed professional. Meanwhile, you could use it as a guideline for comparing submissions from various contractors.

And when it comes to that, your construction project manager will help you analyze the contractors’ bids down to the last detail, before ultimately appointing the most qualified one.

In the end, the project manager will draw up an explicitly-detailed contract agreement, along with a comprehensive project implementation schedule. These should accompany the rest of the documents as you make your final bank submissions.

A sample construction project management schedule.

Now, all in all, you’ll be required to attach the following to your construction loan application:

• Your identification documents.
• Your payment slips.
• Your bank statements.
• Your KRA PIN certificates.
• The title deed of the property.
• Evidence of up-to-date land, rent, and rates payment.
• Building contract agreement.
• National Environmental Management Authority (NEMA) approval document.
• Approved architectural and structural drawings of the proposed project.
• Bills of Quantities as prepared by a registered Quantity Surveyor.
• The profiles of all the professionals involved (the Project Manager, Architect, Engineers, Quantity Surveyor, Contractors, etc)
• The professional indemnity insurance policies of your construction professionals.
• A Project Implementation Schedule detailing all the construction activities plus their respective starting and completion times.

Once you’ve sorted out all these issues, the final decision rests with the bank. So, it’s always advisable to work with a bank that enjoys a close relationship with your work organization, and has a long history of issuing favorable construction loans in Kenya