If Kenyans have a preoccupation these days, other than get-rich-quick schemes, it seems to be real estate. But what dangers lurk in the journey?
BY KEVIN GIKONYO
Before a sector crumbles, it is usually preceded by a grind in the wheels of civility or professionalism, which the society relies upon to entrance progress. When all hope is gone and the last strand is dangling in a failed society, one begins to questions their “gods” ability to compel a fair and just humanity. This picture resonates well with some real estate home owners and buyers in Kenya. A few investors have been conned in “land purchase-to-build schemes” and are slowly spoiling the good name for the majority of professionals in the sector.
Experts in real estate have recorded a decline in stand-alone home owners according to the latest statistics by Cytonn Q1 2019 Real Estate Market Review Report. The report depicts a decline by 1.5 per cent, 2.4 per cent and 1.4 per cent for high, mid and lower-mid end markets in Kenya. It attributes this decline, as a result of a 9per cent marginal decrease in the private sector credit finance, high land and construction costs. I choose to bring another dimension of cons to explain the decline in this sector, which has been experiencing quiet undertones of mistrust causing some jitters on would-be home investors.
The off-plan model
Home ownership in Kenya has suffered a perpetual deficit of nearly 200,000 units per year according to the Kenya National Bureau of Statistics (KNBS). The KNBS study has placed the mortgage owners in Kenya at less than 25,000 and as a result the players in the industry had to think outside the box to increase these numbers. In 2010 a brilliant concept of “off-plan” home ownership was introduced in Kenya. This home purchase model has been practised world over in the developed economies and as such, Kenyans saw this as a progressive model of finally owning their dream homes. The off-plan model is a favourite to many home buyers since it allows easy payment plans with some flexibility to design their house. On the other hand, developers find it rosy, since they get the money to build from owners and avoid bank loans.
The pit-falls
Recently, one of the dailies published stories of troubles that bedevilled pioneer investors in “off-plan” housing, claiming non-performance by home developers. Of course some developers are to blame for misgivings and one would be wrong to cloud out the many success stories in the off-plan purchase model. Careful not to sweep these concerns under the carpet, developers are raising a red flag where a few rogue professionals are giving their craft a bad name, causing mistrust and unwarranted negative perceptions. To date, some off-plan home investors are holding onto volumes of contracts of engagement and no house, no money to show, in hope that the corridors of justice will one day unshackle their dreams of becoming home owners. When such failed promises or expectations replicate, home ownership in real estate sector is bound to slow and consequently reduce the demand.
Unfortunately, some of these complaints from investors form part of misunderstood expectations that cannot be enforced by law. However, it is paramount that civility, fairness and justice be placed at the fore front by developers who ascribe to the long-term demand for the industry. If there are many successful stories of home ownership using the “off-plan” model, then it shall automatically drive demand from potential home owners.
The devil is in the detail
Home owners concur the “off-plan” ownership model is a brilliant idea and could lead to many people owning homes but legal experts caution “the devil is in the detail”. The fine print is seldom read and a lot of caution needs to be exercised before one signs the contract. In many cases, the disgruntled investors in these kinds of contract admit not to have gone through the laborious content to understand their implications and manage their expectations. According to Naomi, the Head of Real Estate and Banking at Gumbo & Associates, there is need for investors to be more diligent before putting ink on paper. One requires legal expertise to comb through the document before binding themselves in this life-time-savings investment in order to pick out unfavourable terms and understand the contract better.
Areas to keenly peruse
The areas to look out for are the plinth area or land size, quoted amenities, terms of payment, location, various clearance certificates from regulators such as; National Environment Management Authority (NEMA), County government clearance, handover timelines and the guidelines of administration especially for gated community projects.
In order to check some of these excesses from the few, registered regulators and stakeholders in the real estate sector, should come up with work plans to sensitise the public on “off-plan” model of home ownership. In addition, the regulators are called upon to act swiftly on the few rogue developers and land selling agents who have taken advantage of investors. This shall ensure home owners are fully aware on what to look out for, in order to help them safeguard their interest and reduce legal battles unnecessary for the growth of the industry.
Kevin Gikonyo is the Director Spine Global Solutions. Email: spineglobalsolutions@gmail.com
