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Off Plan Real Estate: The Good, The Bad, The Risky II

By Reuben     Tags :  

Off Plan Real Estate Investments in Kenya II

This week we continue our coverage of the upsides and downsides of off plan real estate investment in Kenya.


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

  1. Developer Due Diligence

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.

  1. Project Due Diligence

For the project, the buyer ought to establish the following facts:

  • Visit the site – The buyer should visit the site to know it is an actual site that exists. This should be done prior to any investment and throughout the development period to ensure the development is running smoothly and he/she is up to date with the progress of the development, so that if any issues arise, they can follow up with the developer or consider exit options before it is too late. Those who lost money in Simple Homes made deposits without visiting the sites; you should never part with even a penny before visiting the actual site or confirming it is a legitimate site for development,
  • Confirm that the developer has land titles for the given site – The buyer should always insist to be given copies of the title as proof that the developer is the owner of the land and it is not a scam. He /she can also run a search on the title to ensure it has no undisclosed encumbrances and it is genuine,
  • Project plan approvals – The buyer should also seek to know if the developer has obtained the necessary approvals for the property and hence has the legal right to develop the property to prevent delays in the delivery of the project,
  • Project team and their delivery history and capability – The buyer should also know who is in the project team, their previous experience and hence gauge if they are able to deliver the given project,
  • Get regular updates from the developer on the progress – This is a must to ensure that the development is ongoing and will be delivered on time and quality. A developer who doesn’t give regular updates is suspect and he/she could be hiding crucial information or is fraudulent,
  • Research comparables in the area to gauge possibility of earning potential returns promised by the developer. That is rents, prices, yields, occupancy and uptake. This also helps the buyer know if the development is overvalued and can hence look for better investment opportunities. A good developer should be able to share at least a summary of their research findings with the buyer,
  • Timelines – The buyer should understand the project timelines and milestones and hold the developer to them,
  • Project design team – Seek to understand credibility of the project design team including the architects, engineers and the main contractors.
  1. Contracts Due Diligence

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

  1. If it’s too good to be true...; there is no free lunch!
  • House prices are generally high In the current market due to high land and construction costs as well as interest rates. Hence if a developer offers a house at a price that is very low by market standards and not achievable under normal circumstances, and it is the only company offering such, then one should be cautious and evaluate them fully as it is probably a scam to lure unsuspecting buyers desperate to acquire a home.
  • Purchasing off plan is a great way of investing in real estate in Kenya and hence buyers should not be deterred by the few cases of unethical developers as they will miss out on not only a dream home but also a lucrative investment opportunity with competitive returns. Buyers and investors must understand what they are getting into, conduct a background check on the developer, consult their lawyers and invest.

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