The painful road to owning property

Delays in getting land ownership documents due to factors such as hitches in government offices are shattering the dreams of many investors in real estate.

They are fast earning a bad reputation among clients, who often fear that delays in starting or completing a project can only mean that they have been swindled.

Some investors are battling court cases filed by their once-loyal clients who made full or partial payments for their plots, but they failed to avail the titles in time, sometimes due to factors beyond their control.

This has also affected individual land holders, who have been making endless visits to the Land ministry offices for years, seeking title deeds, but in vain.

Until President Uhuru Kenyatta intervened recently, the processing of title deeds took an unreasonably long time, undermining investor-customer confidence and almost killing many land-buying firms.

FINANCIAL CRISIS

This has plunged many investors into financial crises since, when the titles are delayed, most buyers stop making payments. New buyers, too, develop cold feet about dealing with the affected firms, making it difficult for them to operate.
For instance, Kamuthi Housing Co-operative Society, a real estate firm with interests in Nairobi, Kiambu and Murang’a counties, nearly lost a Sh3 billion gated community project, Buffalo Hills and Golf Village in Thika, after delays in the processing of ownership documents plunged them into a financial crisis.

The firm lost its members' trust, while potential clients reconsidered investing with them because they had not availed titles five years after the project was launched, with the management blaming the Land ministry for the mess.

This saw the members stop payments while sales to non-members dwindled. This hit the 8, 000-member firm so badly that the 1, 233-acre project was almost auctioned because of a Sh400 million loan.

The project was started in 2012, and according to the society’s management, the plan, which included 750 homes, each standing on quarter- and half-acre parcels of land on 355 acres and a nine-hole golf course covering 108 acres, was to be completed three years ago.

According to the design, the project located in the semi-arid Kilimambogo in Thika was expected to host a clubhouse situated next to a man-made dam covering 9.5 acres within the golf village, with a swimming pool, game rooms, sauna, gym and spa, among others.

The plots were open to members, who acquired them at a subsidised cost of Sh100,000 for a parcel measuring 50x100 feet, while non-members paid the prevailing market rates.

DENTED REPUTATION

According to the firm’s secretary, Mr Eliud Njoroge, the process started smoothly, with members and non-members making continuous inquiries, which gave them the confidence that the project would be completed on time.

However, the project stalled and only resumed recently, and according to the management of the 54-year old firm, they now hope it will be completed by 2020.

Mr Njoroge said they obtained approvals for subdivision in early 2014 after intense lobbying to ensure that the process, which also laid the foundation for chasing after individual title deeds, was expedited.

But successful buyers started obtaining their title deeds only last month due to the delay, which Mr Njoroge said was caused by challenges beyond the society, and which drastically affected their operations, making them almost lose their assets.

Mr Njoroge said the delay dented their reputation, and most of their clients started doubting their credibility despite the firm having successfully managed two other projects in Thika and Nairobi.

Unhappy members refused to clear their balances while potential clients dithered, such that they could no longer sell enough to enable them to adequately finance their operations.

“Our members stopped trusting us because when the processing of title deeds delayed, what comes to many people’s mind is that they have been swindled. Many of them refused to clear balances while potential buyers stopped considering investing with us and restoring the trust had not been easy task,” Mr Njoroge said.

Consequently, he added, they could no longer repay their bank loans, and their entire project almost went under the auctioneers’ hammer. It also affected the uptake of another 300-acre project in Murang’a County.

POOR CASH-FLOW

During a meeting in May 2016, Mr John Mwangi, the Thika branch manager of Sidian Bank — from which the firm had borrowed Sh420 million to finance the project — told members that the loan was in arrears, and that unless the money was paid, the bank might be forced to take over the project to recover its money.

The firm was also forced to suspend the project, since the poor cash flow would not allow them to build roads, install water and electricity and other required amenities.

This saw the firm review the prices, and after intense lobbying, the members reluctantly resolved to contribute an additional Sh80,000 each to bail out the society and get the project back on its feet.

The money, raised half-heartedly, enabled the firm to restore operations after it resumed repaying the loan, following negotiations with the bank.

Through its Chief Executive Officer, Mr Chege Thumbi, the bank last year agreed to discharge the mother title deed that was used to guarantee a loan to facilitate the processing of title deeds.

“Kamuthi was not able to pay back in reasonable time because they were not able to sell the plots on time, partly because the issuance of title deeds was not smooth. But instead of the selling the project (to recover the loan), we decided to partner and support them, so that as they subdivide and sell the land, the eventual buyers can get title deeds since the bank can get its money back,” Mr Chege said.

The deal ensures that once a client has paid for his or her plot in full, the firm processes and issues him or her with a title deed.

That way even if other members are late with their payments, he or she is not affected.

After the firm received its first bunch of title deeds last month, Chairman Bernard Maina said things have taken a turn for the better. The firm is quickly regaining customer confidence, with members and buyers willingly paying up their balances.

Work on roads, power, water, street lighting and other services have resumed at the project, said Mr Maina, adding that this will facilitate the implementation of their plan as potential buyers also flow in.

“Some of the plots that were dead stock are now selling, members are clearing balances because once you complete the payments, we can process your title deed. This has enabled us to resume our activities and we hope to complete repayment of the loan in one year,” he said.

Other notable land buying firms that have earned a bad reputation over delayed titled deeds include Mbo-I Kamiti in Kiambu, which have been marred with leadership troubles, Embakasi Ranching in Nairobi, and South Ngariama in Kirinyaga, where members have been waiting for decades to get ownership documents.

Mr Joseph Njoroge, the chairman of Eden Park and Country Gardens, a real estate firm, said for a land-buying firm to maintain its clients’ trust and confident, it must ensure that ownership documents are processed and issued to them on time.