REAL ESTATE
Fiasco Of Off-Plan
Housing Sales In Kenya
By Prof. Alfred Omenya
Introduction
Off-plan purchase of housing is a situation
where a buyer pays for the house before
it is built. This mode of development and
financing of housing has been popular
in Kenya as it offers the buyers some of
the biggest bargains in the housing, in
exchange for small patience to get the
house constructed.
Further, the buyers are able to organise
their finances by spreading out payments,
sometime over years, thereby eliminating
the need for bank financing and associated
costs. The developer likewise is able to
make big savings by avoiding or reducing
bank loans. Interest saved over a two-year
construction period can range between 4
to 8% of total construction costs.
This mode of financing has suffered recent
confidence crisis with a study in 2019 by
Sagaci Research and McKinsey pointing
to its drastic reduction in popularity. Only
25% of Kenyans said they would consider
it, 75% preferring ready to occupy homes.
This loss of popularity is associated with a
number of cases where developers received
monies from would be homeowners and
failed to deliver the houses.
Off-plan sales in Kenya especially for flats
and controlled development is enabled
by Section 4 of the Sectional Properties
Act, No. 21 of 1987 that provides for
the subdivision of buildings into units
which can then be registered by the Lands
Registrar. It is on this basis that sections
of buildings such as apartments, penthouses
and office suites can be registered
separately and each unit issued with an
individual Title.
Section 5 of the Act provides for the
registration of sectional plans. This enables
developers to come up with a concept,
generate a sectional plan from an existing
Stories of off-plan sales are stories of
greed, indiscipline, theft, enabled by poor
state regulation and failure to act on con
cases. This realm is characterised by colourful
con-characters whose only interest
is to loot their victims; and gullible,
equally greedy victims, who are easily
lured with schemes that promise heaven
and deliver hell.
plan of the site and sell the concept to
potential investors in the form of off-plan
sales.
Off-plan sale of housing is like any other
housing from construction and contractual
arrangements perspective. Construction
related laws requiring approval of
development, consultants and contractors
should apply. Further, laws of contract
apply between the vendors and the buyers.
Various land and property laws apply as
they do for other types of housing.
Granted, more specific regulation is
needed for this typology of housing, but
it is baffling why the government has
allowed off-plan developers to operate as
though there are no laws that apply to this
type of construction causing untold harm
and suffering to buyers.
Advantages Of Off Plan
Schemes
The allure for off-plan schemes has been
mainly because of the lower than existing
market prices and flexible payment plans,
especially for those who may not have
access to adequate bank financing. Buying
a house off-plan also allows for flexible
payment plans. Typically, one needs to
deposit 10 to 20 per cent of the purchase
price, and the rest of the payment is either
done upon completion of construction,
or in flexible periodic installments. This
allows individuals without the financial
muscle to acquire homes they would
otherwise not afford.
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