‘Greedy county officials’ distorting property prices

Stakeholders in the property market have accused the managers of county funds of creating distortions in the market prices by paying highly inflated prices for goods and services in order to get kickbacks.  

During a meeting in Nairobi last month, members of the Town and County Planners Association of Kenya (TCPAK), the National Government Constituency Development Fund, County government planners and contractors who met under the auspices of the Property Market Integrity Watch Group (PMIWG), unanimously agreed that greed had led to exorbitant pricing. 

The PMIWG chairman, Mr John Kirima, singled out county governments and members of parliament as “the two notorious inhibitors of integrity-based transactions in the property market, driving property prices obscenely up.”  He said the counties’ procurement departments were willing to buy property “whose prices had been inflated by up to 2,000 per cent so that they could share the extra costs”.

He said the counties’ pricing mechanism for real estate developments “is inciting property sellers to demand abnormal prices when disposing of land and buildings to the government.” Senate Deputy Speaker Kembi Gitura concurred, saying devolved funds were being used to lock out the middle- and low-income earners who wished to invest in property. 

He gave the example of Murang’a County, which he said had bought an arid piece of land in Makuyu for Sh10 million an acre, when government valuation of land in the area was Sh100,000 per acre.

CLEAN DEALS

He noted that as a result, land owners in the neighbouring area were demanding between Sh5 million and Sh10 million per acre. “Utilisation of devolved funds in the property market has to be tamed of its inflationary aspects that are bad for the both the national and regional governments,” Mr Gitura said.  Mr Gitura said the malpractices could not be stemmed by Auditor General’s office, which uses  outmoded techniques.

“The problem with our auditing system is that only a receipt is demanded to support a transaction. Whether the item procured was rationally priced is not an issue, that if a biro pens are said to have been bought for Sh50,000 each and there is a receipt to support that transaction, it passes as a clean deal,” he said. 

Mr Gitura said the office of the auditor general should move from doing simple audits and conduct probes, “where the integrity behind a deal will be investigated”.

Acknowledging that devolved funds had been misused, NGCDF Chairman, Mr Elias Mbau, however, cautioned: “I would want this meeting to distinguish between value addition and inflation. In its role in the property market, the NGCDF is doing a good job in value addition to properties.”  He added that regional procurement departments urgently needed land, building materials and labour, which had been translated by the market to mean that demand is high.

“Besides, the government has been branded a willing buyer of  goods and services and since  the sellers believe they will strike gold strike in the deals, they automatically become rigid in their pricing. So I would not say devolved funds are inducing inflation in the property market, but rather, are inferring value addition,” he said.  

Mr Mbau said that the scenario, if read in the right context, was good for the economy “because it spurs rapid wealth creation for suppliers and also opens up regions that have for a long time been classified as marginalised.”

However, Mr Kirima dismissed this explanation was an “academic way of disguising corruption as a perfect scenario in the utilisation of devolved funds”. “When a gate worth Sh20,000 inclusive of labour is fitted by a county government at a cost of Sh8 million, that is not value addition but pure theft of national resources.

When a simple toilet is built using NGCDF funding at a cost of Sh10 million instead of Sh40,000, common sense will not tag that as value addition,” he said.  He said if checks are not urgently put on the use of devolved funds in the property market, the market will be so distorted that attracting investors to partner with the government in  land and housing will soon be an illusion.