Why Some People Choose Land Over Other Investments That May Offer Better Returns

More often than not, people debate whether investing in land makes sense, especially when other investment options offer higher returns. 

On one side are those who argue that investors should follow the numbers. For example, if a tax-free government bond is offering returns of around 12% per year while a piece of land is expected to appreciate by only 4% to 8% annually, the choice should be obvious.

Yet many people still choose the land.

To some, this decision appears irrational. The answer is that investment decisions are not always driven by returns alone. In many cases, psychology plays a bigger role than we realise. 

One of the most powerful explanations is a concept known as Tangibility Bias. This is the tendency to place greater trust in things we can see and touch than in assets that exist mainly as numbers on a statement or screen.

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Why People Trust What They Can See More

Tangibility Bias is our tendency to place greater value on things we can see, touch and physically experience than on things that exist mainly as numbers on a statement or screen.

A plot of land is tangible. You can visit it on weekends, walk around it and point to it with pride and say, "Hii ni shamba yangu." Ownership feels real because the asset is physically present.

Financial investments such as government bonds, special funds and NSE shares are different. While they are just as real, ownership is represented through statements, certificates and account balances rather than something you can physically interact with.

This difference matters because our brains often associate visibility with safety. As a result, many investors derive a sense of comfort from owning land that they may not get from holding a financial asset, even when both have the potential to build wealth.

The bias becomes even stronger when the land is located in a familiar place, such as one's rural home area. People understand the location, know the surrounding neighbourhood and can easily check on the property whenever they want. That familiarity can create a feeling of control and security.

By comparison, investments such as bonds, shares and special funds may feel distant or abstract. Consequently, some investors instinctively place more trust in the plot of land, regardless of how the numbers compare.

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The Consequences of Tangibility Bias

The challenge is that what feels safer is not always what produces the best financial outcome.

An investor may reject an opportunity offering higher returns simply because it feels less tangible.

In some cases, this can lead to an overconcentration in one type of asset.

Another issue is that land comes with costs that are sometimes overlooked. There may be legal fees, survey costs, fencing expenses and the risk of delayed appreciation if development in the area takes longer than expected.

Meanwhile, a financial investment may quietly generate returns without requiring the owner to visit, monitor or maintain it.

This does not mean land is a bad investment. Rather, it means investors should be careful not to confuse familiarity with superiority.

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How to Deal With Tangibility Bias

The first step is recognising that feeling safe and being financially better off are not always the same thing.

Before making an investment decision, ask yourself: "Am I choosing this investment because of its potential returns, or because it simply feels more real?"

It can also help to compare investments using objective measures such as expected returns, risks, liquidity and costs rather than relying solely on intuition.

Another useful approach is diversification. An investor does not necessarily have to choose between land and financial investments. It is possible to own both and benefit from the different advantages each offers.