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Auctioneers stuck with homes no one can buy

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Along the white sandy beaches of Nyali, Mombasa, tall palm trees wave behind a beautiful Sh6 billion resort.Scenic as it may be, it has been on sale for the last three years.

The owners of the hotel have yet to find a buyer.Despite their intense efforts to go after even international investors, no buyer has shown interest in snapping up this gem that overlooks the Indian Ocean.

Now, out of desperation, they are willing to take half what they wanted – they will settle for Sh3 billion.The owners of the hotel are not alone.

If anything, they are perhaps better off than many other owners of property that is in distress who cannot get buyers, even at cut prices.In an even worse position are banks that have repossessed properties from defaulting clients and put them up for auction, but these are largely unsuccessful. The auctioneer’s hammer will not fall.

An analysis by Home & Away has revealed that of the hundreds of properties on auction – on the back of a slowing economy – only a handful have found buyers.

The most affected are high-end properties.Together, auctioneers have tried to dispose of houses – both residential and commercial – whose value could be running into billions of shillings.In the month of January alone, one of the largest auctioneers put up for sale property worth Sh5 billion.

Among the houses that stand out and have been put up for auction in the recent past include a section of Nextgen Mall along Mombasa Road, the Nairobi Upper Hill Hotel and a three-bedroom villa at the prestigious Great Rift Valley Lodge where a unit can go for Sh50 million.Others are Thika Business Centre (whose anchor tenant is Naivas Supermarket) estimated to be worth Sh540 million, and a penthouse at The Mirage in Westlands that can fetch Sh48 million under normal circumstances.

Industry players, however, say just about 10 per cent of the properties on auction are finding buyers. There are instances where the auctioneers have not found anyone willing to bid above the reserve price.Basically put, there is no shortage of houses that buyers can get for a bargain.

This has seen phrases like ‘buyer’s market’ thrown around, yet many of the distressed owners are unable to offload their assets.Garam Investments Managing Director Joseph Gikonyo, whose firm is auctioning properties worth billions of shillings this year, said out of 10, only one property is finding a buyer. He pointed to a bad economy and struggling businesses owing to high tax rates.“The overall economy is doing badly. The county governments are not paying suppliers, and this has to have an impact,” he said.“KRA is another issue; it’s going hard on SMEs with tax demands. Businesses are closing rather than struggling. It’s hard to auction in such an economy.

”Mr Gikonyo said household goods like cookers and fridges are the only fast-moving items at auctions. Buyers are likely to get a bargain on electronics and other items that do not require too much capital.A limiting factor for the auctions however could also be a recent law that seeks to protect property owners, dictating that property sold at auctions cannot be sold at under 75 per cent of the market price.“Selling will take longer. We have to keep trying,” said Gikonyo.

“Out of 10 we’re only managing to sell one whereas in the past we used to sell seven.”Defaults on mortgage loans advanced by banks have been on the rise. The latest data by Central Bank of Kenya (CBK) shows that default on mortgages increased 41 per cent in the year to December 2018 to Sh41 billion from Sh27.3 billion in 2017.The rate of defaults on mortgages is much higher when compared to other loans by banks, which stood at 12.3 per cent in 2018.

“The outstanding value of non-performing mortgages increased from Sh27.3 billion in December 2017 to Sh38.1 billion in December 2018.  The mortgage NPLs (non-performing loans) to gross mortgage loans was 16.9 per cent in December 2018 as compared to 12.2 percent in December 2017.“The ratios were above the industry gross NPLs to gross loans ratio of 12.3 percent in December 2017 and 12.7 percent in December 2018,” CBK said.

A handful of the big banks control the Kenyan mortgage market, with the CBK data showing that six institutions control 76.1 per cent of the mortgage loans advanced to Kenyans.The largest mortgage lenders are KCB with a market share of 28.59 per cent, HFC (14.99 per cent), Standard Chartered Bank (11.52 per cent), Stanbic Bank (11.40 per cent) and Co-operative Bank (5.21 per cent).

Banks hard hit by high mortgage NPLs have resorted to working with their customers to get to an amicable end.These include jointly taking property to auctions as opposed to the aggressive approach they have taken in the past, where they kicked owners out of houses on defaulting.

They are also renegotiating loans, for instance by increasing the repayment period and reducing the monthly remittances.Kimani Thambo, Chief Executive of Himaya Heights Investment said such “diplomacy” by lenders was previously unheard of.“Lending institutions are using tactics such as decreasing the monthly installments, increasing the loan duration and allowing customers to look for clients to buy their properties,” he told Home & Away.

“This is as opposed to former days when clients used to be evicted from their properties to give way to a new owner, after a successful auctioning process.”He noted that real estate agents are going for even weeks without getting ‘serious’ enquiries on property they have put in the market, describing the current conditions as “hell of a time” for the real estate industry.“You’ll be lucky to get a serious enquiry. It is difficult to come by a client who views a property and registers an interest by giving an offer,” said Mr Thambo, who is based in Mombasa.

Steve Ogada, an associate principal at finance advisory firm InVhestia, also pointed to a bad economy as the contributor to the numerous auctions. It is also the cause of failed auctions.“Banks have a lot of non-performing loans because of the status of the economy and go to foreclosure, they have to offload the collateral that had been secured,” he said, adding that high-end areas have been hit hardest.

“There’s been a glut on the high-end segment. That’s why if you drive along Kilimani, and Lavington, (you’ll see) a lot of complete houses but no curtains. They aren’t occupied.”It might take another few years before the market normalises. Real estate consultancy firm Knight Frank said the market has started trending upwards, with expectations that it will have fully recovered over the next two years.Knight Frank Kenya Managing Director Ben Woodhams said the property market will soon correct itself.

He said that due to the 2016 rate cap real estate projects had slowed down.While the sector remained a buyer’s market owing to an oversupply especially in the high end segment, he said, prices are starting to stabilise.“While the market looks like it has an oversupply at the moment the amount of space coming into the market has actually reduced partly because of the liquidity issues caused by the interest rate caps that came in 2016. We’ve actually seen the slowdown in development and as a result the oversupply situation is slowly correcting itself,” said Mr Woodhams.

By Standard 


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Bodaboda chama grows into a multi-million shilling housing cooperative

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A journey of a thousand many miles starts with a single step. A Nakuru-based bodaboda operator’s self-help group proved this in its growth. Driven by the ambition to have something to take home once they couldn’t ride any more, ten bodaboda operators from Barut, Nakuru West in 2015 formed Kianjahi Group, pooling a minimum savings of Sh100 per week per person.

“Being a bodaboda operator is a risky job and has serious effect on one’s health especially if you don’t dress properly for the cold. After attending a seminar in Machakos we decided to start making savings,” said Benson Sigei, the group chairperson.

The group grew as more members joined in 2016. After evaluating their progress, the members increased their weekly savings to Sh200 and eventually to Sh1,000.

“Before the year ended we were nearly 100 members. Our savings were growing and we had to come up with plans which some members considered as too ambitious and pulled out,” says Sigei. With savings of nearly Sh2 million, they bought a 1.6-acre piece of land which was previously a sand quarry.

“It cost us Sh2.1 million in buying the land and rehabilitating it to usable standards. We embarked on making savings for constructing houses which would be of similar design,” he said.

To make this possible they converted the group into Kianjahi Housing Cooperative Society Limited and introduced Sh15,100 registration fee and minimum share capital of Sh60,000 payable in Sh500 weekly instalments.

AmpThe group started the construction of two-bedroom houses in a gated community model.

“Every member now contributes a minimum of Sh1,500 for savings every week. Those yet to clear their share capital make an additional payment of Sh500. This amount does not exert great pressure on the riders since the majority make nearly KShs1,000 per day.

The group then started the construction of two-bedroom houses in a gated community model where four houses sit on every 50 by 100 feet plot. The cooperative completed the construction of the first 50 units majority of which have already been occupied.

“We took a Sh15 million loan and in addition to our savings we bought an additional acre of land at Sh2.1 million. In the first phase, we have constructed 52 housing units. 35 members have already moved in,” said the vice-chairman.

The cooperative has bought a third parcel of land on which they intend to set up houses for all members. Members who moved in during the first phase like pay Sh2,000 per month. Sh200 goes to savings and Sh1,800 going towards offsetting the cost of construction. The payment for the houses is spread over seven years.

by Standardmedia.co.ke


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Enough is Enough: Kenyan man in US relocates to motherland to become a farmer

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In a bold move and which took great courage, a former Kenyan Diaspora man Kunga Kihokia who was born and raised in Miami Florida has moved back to Kenya, bought a 20 acres piece of land and established an organic farm in Murang’a.

Initially, Kunga had planned to be in Kenya for three weeks 5 years ago but after what he says was the realization of the problems affecting Kenyans because of western lifestyle which he himself was struggling with, he felt strongly to start an organic farm to address those problems.

Kunga has built a water tower to use gravity that allows the water to get pumped and distributed  through  irrigation into the field. Everything in the farm is powered by solar energy and he has dug a borehole that supplies enough water for the farm. Watch the video, be inspired  and enjoy.

Source: Diasporamessenger.com


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Carpenter hopes payday in sight in 27-year fight over presidential seats

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For the past 27 years, Solomon Njoroge Kiore has battled with the government over a debt that was initially Sh195 million but has now ballooned to more than Sh500 million in an unpaid bill for presidential furniture he delivered.

Tomorrow (Monday), Mr Kiore will go to the High Court in Milimani hoping that the end is in sight as he is supposed to get a hearing date for a case that has had many twists and turns.

In 1992, Mr Kiore, the proprietor of Furncon, a furniture company, won a government tender to supply presidential furniture but down the line, the deal went sour when the military officials returned the chairs a year after President Daniel arap Moi had used them — allegedly without payment.

The chairs had been acquired through the Ministry of Defence and approved by State House, according to court documents.

The government has denied failing to make the payment and he went to court to seek redress in 2007.

Although Mr Moi used the chairs for a year, Furncon says the military returned them to his workshop.

With the matter dragging through the courts for years, in February 2018, a decision was reached to settle out of court.

But the parties could not agree on the amount to be paid, with the businessman citing lack of goodwill on the side of the state.

Sh527 million

That year, Mr Kiore was seeking Sh527 million, being the price, court costs and storage charges.

He told the court he did not receive any invitation to negotiate a settlement.

Then last year, Symon Yator Cheberek, a military colonel, took over the case after Attorney General Kihara Kariuki appointed him to represent the state in all civil matters in which the Ministry of Defence is a party.

High Court judge Joseph Sergon allowed Col Cheberek to act for the state, but Mr Kiore objected this saying allowing a military officer to take up the matter was tantamount to court-martialling him.

“There can never be a situation where a civilian can be in court one on one with a distinctive disciplined and uniformed force,” he stated in an affidavit on March 25, 2019.

Col Cheberek said he is an advocate of the High Court of Kenya and the Attorney General was in order to appoint him.

Mr Kiore wants Justice Sergon to recuse himself from hearing the matter, alleging bias and citing a 2017 ruling by Justice Philip Mwongo barring the military from taking over the case.

Justice Sergon has declined the recusal plea, saying the claims of bias could not be proved.

 Now, Mr Kiore says his business has died, as he can no longer use the premises where he has kept the chair as it is an instrument of power.

“It was used by a President for a year. It is treasured and therefore no one is supposed to touch it. My business has suffered immensely because of this seat,” he says in his court documents.

In a letter dated May 10, 2001, the Attorney General informed Mr Kiore that the Department of Defence had extended a without-prejudice offer purely out of honour and respect for presidential instruments.

“However, having realised that your claims include other items worth millions of shillings reflective of your other financial issues not related to the chair in question, it has not been possible to formally make the offer to you,” states the letter signed by V Onyango, a deputy litigation officer at the State Law Office.

Admission of liability

The offer, the officer states, is not the government’s admission of liability, because “the said chairs were ordered by the Agricultural Society of Kenya”.

The September 1992 deal was not the first. Mr Kiore’s company had sold furniture for VIP use in State functions to the government before.

He says the seat was made under strict supervision of the military and State House staff.

The firm says it was asked to make more furniture for presidential lounges at the Eldoret Moi Airbase and Kahawa Garrison and deliver the chairs to the Agricultural Society of Kenya offices in Nairobi for a three-day presidential function.

But the President ordered that the furniture remain at the ASK offices, according to a letter by the ASK dated August 5, 1999.

Now, Furncon wants a declaration that the ownership of the items was passed on to the government in September 1992, under the National Flag, Emblems and Names Act and as such they are instruments of power.

by nation africa


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