What is happening in our property market?
Why is it easy, or so it seems, for people to con or be conned. Our property industry, looks to be at a crossroads.
It is now obvious that the property boom witnessed a decade or so ago has dwindled. The returns, though still attractive, are no longer as lucrative as before.
Some property analyst novices have recently been even talking about a looming bubble; of course that is a farfetched imagination.
But the reality of struggling property sales is here with us. Perhaps our creation? Maybe.
Frequent building collapses in the last five years has been an inerasable watermark of this industry.
Government demolitions that begun in the last quarter of 2018 are still fresh in the mind of most Kenyans. Consciously or not, the perceived image damage to the construction sector will take some hard work to undo.
But indubitably it is the now near normal of conning home buyers that we must expeditiously put to ice.
Spurious property developers have been ahead in their lie ingenuity. Their unabated success have seemingly lured even once astute developers to the altar of greed. Results; the ever weeping property buyers in our industry.
Many developers are still reluctant to accept the reality that the era of property high return boom of supernormal profits is by the wind.
This is no longer the industry of a decade ago where everyone rushed to quickly cash in. We are in the dawn of making reasonable normal returns.
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Since the old dog seemingly won’t bend to learning new genuine tricks to survive, we must force them to for the sake of public good. I have urged, severally before, that this property industry is ripe for new regulation to strengthen it.
Isn’t it evident that off-plan property sales or even property advertisement need some regulation to caution the public? Dubai has wonderful model regulations that we can borrow from.
But even more, the recent public spat between Sunset Boulevard residents and I&M bank also brought to fore an area that government need to properly tighten through regulation. There is a growing trend where developers either through collusion or wit over-borrow money form financial institution to finance projects.
How is that even possible? Yes it is. I have lived to witness this first-hand. Project feasibilities are twisted to satisfy this greed and the never ending lackluster approach by financial institutions to project finance has been the icing for such developers.
They borrow money that is impossible to settle even through house sales and since the houses are normally included as security for the acquired facility, home owners have ended up bearing the brunt of the hammer fall when banks seeks to recover their money.
For instance, when a developer over-borrows on a project let’s say Ksh 100 million, the onus is on the developer to settle this through other sources outside the project returns. In most cases they are unable to since even the entire project returns falls short of the expected money needed to be paid to the bank.
There are growing number of cases where buyers have fully completed paying for their houses and yet there is still the developer’s loan pending to the bank. Or in some cases the pending amount from the buyers at time of project completion cannot adequately settle the borrowed amount even if they fully pay.
To cure this menace, I believe it’s time we made it mandatory for developers to disclose to the buyer the loan amount they have acquired to finance the property they are buying into in the case of off-plan sales.
This will ensure that developers are moderate in their borrowing for scrutiny sake knowing it would determine their sales by providing a buyer an interrogation platform.
No country has done away with the real estate industry. Amidst its challenges, they have innovated ways through regulations to strengthen the gaps for the sake of the economy
A collapsing property market is bad for the country. Let’s wake up to this realization-pronto. We must not let other people’s sweat easily fund other luxurious lifestyles. At the moment it is. Way too easily.