Off-plan properties a double edge sword for home buyers

By Steve UMIDHA

Homebuyers throwing caution to the wind to buy off-plan properties risk losing their investments as cases of cons in the sector continue to emerge.

While the concept, which is an arrangement where a property buyer acquires a property that is yet to be constructed has gained prominence over the last few years, consumer concerns of phony developers taking advantage of unsuspecting home buyers are rising by the day.

Many cases of off-plan housing projects folding with investors’ deposits from companies promising ‘affordable and pocket friendly’ schemes, continue to hit headlines.

It is a disquieting scandal that often leads to protracted lawsuits and ultimately poverty or death resulting from hopelessness of affected homebuyers most of whom invested all their lives’ savings into such projects.

Other victims have had their assets repossessed due to their inability to service their mortgage loans.

And now affected investors are speaking out.

“It is frustrating and it is one of those regrets I have today. I’d rather buy a constructed unit, the high cost notwithstanding,” offers Wilfred Kimani, who describes his ordeal with an unidentified property development firm as “depressing.”

Kimani says his house – partly paid for, is yet to be handed over to him, three years since the promise was made. Initially, Kimani discloses that the project was to be handed over within 18 to 24 months, but that is yet to happen more than three years later.

“In my opinion, off plan real estate investing is just another scam awaiting Kenyans. Not many Kenyan companies have done it and succeeded.

So, selling an incomplete development with just a promise of completion in the future does not make sense to me,” offered Gitonga Kamau, while narrating his ordeal with a local news outlet.

Ordinarily, you will need to pay the developer a deposit of between 20 to 30 percent (down payment) and as per the stipulated agreement, with the remaining money payable in installments as construction progresses or on completion.

Some developers ask home buyers to pay 100 percent of the money before the project starts.

The benefit of buying off-plan property is vast according to VAAL real estate firm including flexible and lower payment plans, the convenience to change the layout plan and the option of changing finishing materials among others.

“For instance, in the Wilma Towers in Kilimani, we broke ground in October 2019. One of the 1-bedroom units was initially going for 4.9M and is currently going for 6.8M. Therefore, if you buy a unit now, the unit will have appreciated by 39 percent,” notes the firm.

Mizizi Africa Homes, one of the first few firms to pioneer the concept in the local market, says it was responding to rising demand for off-plan units that “are affordable in prime and strategic locations.”

“The positive uptake and the rise in number of inquiries shows a large appetite in our projects. We wanted to meet this demand,” said George Mburu – the company’s Chief executive on the firm’s first off-plan project Penguin Estate in 2020.

Unsurprisingly, developers typically love off-plan sales – deposits not only because such payments help with cash flow, but also provide surety that the property is sold, according to Alice Mukami – another property developer who runs Gael Properties ltd.

But she is quick to concede that, for buyers buying such ‘unseen’ properties is much more of a gamble as their decision is based on brochures, plans, models and a visit to the developers’ marketing suite.

“It is basically a trust concept,” says Alice, adding that, “On the plus side, the property could go up in value before they even move in.”