This week we continue our coverage of the upsides and downsides of off plan real estate investment in Kenya.Introduction
Recent months have seen a number of property buyers coming to the fore claiming to have beenswindled by developers over off plan real estate purchases
As a result, we discuss the recent cases of Simple Homes and Gakuyo/ Ekeza Sacco, and conclude by advising buyers on what they should look out for when purchasing off plan real estate in Kenya. .
Simple Homes was founded in October 2015 and began operations claiming to be a developer selling off plan houses via a tenant purchase scheme. Buyers were first required to join their cooperative and pay a Kshs 2,000 admission fee, and a subsequent 25% deposit for the houses in various locations including Syokimau and Kitengela.
After this, they would pay monthly instalments equivalent to their current rental rates, which could be as low as Kshs 24,000 per month. The prices of the houses were fixed and no interest was charged.
The buyers were to assume occupancy immediately after completion and could pay off the 75% balance within 5-40 years.
Repeated requests by clients for site visits and progress updates went unanswered by the firm. In February 2017, Simple Homes shut down operations and all online activity. Local dailies have reported that at least KES 500 Million was lost by investors and home-buyers in the scheme
Gakuyo Real Estate / Ekeza Sacco – Gakuyo Real Estate / Ekeza Sacco is alleged to have collected in excess of KES 100 Million from about 7,000 clients in deposits with each paying KES 10,000. The total sum inclusive of subsequent installments being in excess of KES 3.0 Billion.
The deposits were supposed to accumulate to amounts large enough to purchase either houses or serviced plots in various parts of the country including Embu and Nanyuki.
Gakuyo promised but failed to deliver the first batch of houses in 2016. Disgruntled clients have also claimed that the Sacco asked them for extra money without delivery. These allegations prompted the State Department for Co-operatives and the Commissioner for Co-operative Development to launched investigations into the scheme.
The millions of shillings lost in the above schemes could have been avoided with proper due diligence. Before parting with your money, we recommend that you take the following steps
The buyer should ensure that the developer is a registered company in the country of operation. He/she should also know who the directors of the company are, how they have delivered in previous projects if they have any, to gauge their workmanship, delivery to promise, timelines and proof that they are actually developers. This will prevent one from investing with a brief case company run by fraudsters.
For the project, the buyer ought to establish the following facts:
The buyer should hire a conveyancing lawyer to review all contracts signed and ensure they are all above par and he or she is not defrauded in any way or exposed to unnecessary risk
Cytonn Diaspora offers several quality investment ready off-plan properties with flexible payment plans.
To be a successful off-plan property investor, contact our financial advisers at email@example.com.