The news that Urithi Cooperative Society and Suraya Properties Limited have run into headwinds has added more Kenyans to a rapidly increasing list of investors whose wish to own homes has turned to a nightmare.
With an average home loan size standing at Sh10.9 million, repayable in 12 years, according to Central Bank data, very few Kenyans can afford to own a home through bank financing or by constructing using their own cash.
A good number opt to save and access loans through saccos. Buying off plan, which entails acquiring a property when it is still under construction in order to get discounts, has also become a popular option lately.
Buying a house off-plan also allows for flexible payment as all one needs is a deposit, which is usually 10 to 20 per cent of the purchase price.
The rest of the amount is either paid upon completion, or in flexible periodic instalments.
This allows individuals without financial muscles to own homes they would otherwise not afford.
However, an increasing number of saccos and real estate firms are reeling under the weight of a poorly performing economy, mismanagement, bad investment decisions, fraud and bad loans that are now threatening the collapse of the crucial sector.
If the trend goes unchecked, it could have far reaching damages.
On Tuesday, the family of former politician Njehu Gatabaki denied ever getting into an agreement with Suraya for the development of Four Ways Junction.
This further compounds the company’s problems, whose prime property elsewhere is already facing the hammer.
This is as desperate investors continued flocking the Directorate of Criminal Investigations (DCI) headquarters for the second day to record statements in the hope that the government will help recover their money from Suraya.
A similar scene played out in March when thousands of investors thronged the DCI headquarters to record statements against Ekeza Sacco, which had sunk with Sh1.8 billion and with no houses for its over 5,000 members.
“Dr” David Kariuki Ngare, alias Gakuyo, who allegedly used Ekeza’s money to upgrade his lifestyle, accepted to reimburse investors. The process is moving slowly and investors are losing patience.
“They come bearing a target number of those they want refunded and create confusion when the funds are diminished. The process gets disrupted and those left on the line are forced to go back home,” a disgruntled victim told the Nation.
Three saccos — Mwalimu, Ekeza and Stima Investment Co-operative — are estimated to have lost their members upwards of Sh3.6 billion through mismanagement or fraud by top officials.
At Metropolitan Sacco, detectives are investigating if the management circumvented rules to award themselves loans, leading to liabilities amounting to Sh11 billion.
Urithi Sacco, whose two properties are likely to be put up for auction, claims that it has cleared with the bank whose loan it defaulted.
“The loan has been restructured and members have agreed to take over. The impression that the land is in distress is not true,” Urithi chairman told the Nation.
“But if you look from a wider angle, the issues facing saccos are as a result of problems in the wider macroeconomy. Money is not circulating the way it used to and banks are not lending to high-risk borrowers, which means people are not acquiring immovable assets,” he said.
On Saturday, Suraya announced that it had secured a Sh1.6 billion financing loan from four banks to complete its mega housing projects, whose construction had fallen behind schedule due to the biting liquidity crisis that has hit the sector.
“Despite these challenges, Suraya remains committed to complete all the remaining projects, and our promise to all our clients is that we are working tirelessly to raise funds both locally and internationally for Lynx Muchai drive, Lynx Royal, Classix Fourways and The falls Riverside,” Suraya Property Group chief executive Peter Muraya said.
This has however not appeased their investors, who are in panic mode over possible auctioning of the firm’s investments. They are now seeking a court order to declare all the firm’s incomplete investments ‘not for sale’.
“This is something we need to do before the DCI press their criminal charges against Suraya. We cannot just sit back and watch,” Ms Wairimu Thumbi, an investor, told the Nation.