Real estate companies in Kenya have introduced new and visually striking housing developments in various locations, with the aim of helping renters become homeowners in a short period of time.
Even though these projects come as new and as different companies, the end is almost similar. In most cases, the buyers fulfill their end of the agreement by paying the initial deposit and making subsequent payments.
In the beginning, or even in their first several projects, everything progresses as planned and many people continue to join.
However, at different stages of projects and due to various reasons, most developers fail to meet their end of the agreement. They fail to meet the handover deadline and make little to no progress in their construction sites.
Most frustrated investors end up taking legal action, which takes years in court and investors to lose more money.
This article aims to serve as a warning for potential investors by revisiting some of these types of projects in Kenya.
1. Banda homes
Banda homes began as Dinara Developers in 2011, then became Lettas Developers in 2013, and finally rebranded as Banda Homes in 2018.
Banda Homes operated as an off-plan developer, selling homes at the design stage and constructing them as payments were being made over the course of construction.
Some of Banda Homes' developments include Oak Park Estate, Pine Wood, Maple Ridge, Rosewood, and Redwood. These are located in secluded and gated communities off Kenyatta Road, Thika Road Exit 14, Waiyaki Way, behind Sigona Golf Club, and on Kiambu Road respectively.
The projects that were affected were those of Pinewood and Rosewood, located along the Thika Superhighway. Oak Park Estate on Kenyatta Road, also off the Thika Superhighway, faced scrutiny in early 2019 due to customer complaints of delays.
It is uncertain whether investors will be able to recover their investment as the company is facing multiple legal cases stemming from previous unfinished projects under Dinara Developers, Lettas Developers, and now Banda Homes.
2. Dinara developer
Dinara Developers specialized in acquiring large tracts of land and dividing them for sale to individuals. They also enhanced the value of the land before selling it. The company focused on developing affordable housing units, targeting the middle-class market as its primary customer base.
They worked on projects such as Mazuri Side I which consisted of the development of 169 two-bedroom units. The project, Mazuri Two, was located next to Mazuri One. Other developments by Dinara Developers included Dinara Lenkai, a project of 60 two-bedroom housing units, and another development along the Eastern Bypass between the Thika Super Highway and Muranga Road, consisting of 19 standalone houses priced at around 12 million Kenyan shillings.
They had many other projects but due to various complaints, the company faced imminent collapse.
3. Gakuyo Real estate
Gakuyo started small in 1998 by selling a single parcel of family land. Over time, it grew to become one of the country's leading land-purchasing and selling conglomerates. However, this changed when Mr. Kariuki Gakuyo, who was the managing director, was accused of embezzling funds belonging to the 78,000-member Ekeza Sacco. Ekeza Sacco members had invested in the Sacco with the expectation of acquiring properties through Gakuyo's Real Estate Firm.
An audit revealed that Gakuyo had transferred 1.5 billion shillings from Sacco's Equity Bank account between 2015 and 2018 to his personal businesses and properties.
The company had promised to deliver the first batch of houses in 2016, but they have yet to be delivered. Some unhappy clients claim that they were asked for additional money without receiving the homes as initially promised. The members are still suffering losses to date.
4. Urithi housing
The company was established by David Gakuyo Ngari among others. Mr. Gakuyo later left to form Gakuyo Real Estate. Due to the Panorama Gardens scandal, the Tola 3 and Tola 4 properties behind the Mangu High School scandal, the OTG project scam in the Joska area of Machakos County, the Qweto Gardens scam in Malindi, and many other fraudulent projects, over 32,000 members of the cooperative incurred billions of loses.
Panorama Gardens was marketed and sold by Urithi as plots ready for immediate development, attracting 400 investors. An eighth of an acre was sold for 2.25 million shillings. The investors were unable to develop their properties as most never received title deeds, while others only have ownership certificates or agreements with Urithi.
5. Kamuthi housing
Kamuthi Housing is a cooperative society that was established in 1964 as Kahawa Farmers and officially registered as a cooperative in 1986. Over the years, the company has been able to provide services for its members/purchasers by acquiring land, adding value to it, and providing social amenities.
This changed when two banks issued the society with notices warning that the company may have to forfeit its multi-billion-shilling projects, including Buffalo Hills and Golf Village in Thika and Soya estate in Murang'a, due to over half a billion shillings of unpaid loans that the company took from the two banks to purchase land in Kiambu and Murang'a counties.
The projects that were impacted were Buffalo Hills Golf and Leisure Village in Thika, Kiambu. The company marketed the project as a creative concept of a golf course and clubhouse set on a quarter acre, which sold for 5 million shillings. Many investors were convinced to buy into the idea, only to potentially fail to gain millions of shillings with limited construction taking place.
6. Suraya Property Group Ltd
Surya Property Group Limited was founded in 2006 by Sue Muraya and Pete, with a focus on the real estate industry, offering customers modern houses. They worked on several notable private projects in Kenya, including Fourways Junction face2 located on Kiambu Road, Spring Valley Mall in Westlands, Rosslyn Gardens, and Encasa@Mombasa Road phase 2.
In some of these projects, investors have been dealing with years of delays since 2014. Frustrated investors have taken legal action against Suraya Properties Ltd, after multiple attempts to pressure the company to deliver promises failed, other investors’ properties have been auctioned after the investors purchased and moved into the houses.
7. Cytonn Investment Group.
The investment model used to work like this: you would invest your money and have to wait for a full year before earning interest, and then receive your money back. It was an unregulated product that claimed to primarily invest in the real estate sector and operated like a "Chama" (merry-go-round).
This product had over 4,000 members who invested about 10 billion shillings in around 10 real estate projects.
The Capital Markets Authority announced that Cytonn was under investigation following allegations of engaging in unregulated activities and complaints from investors.
Cytonn informed investors that they should notify the company at the end of the year if they wanted to receive their payments or if they wanted to roll over their investment for another year. Later, the company faced liquidation petitions in court and asked the investors to attend an extraordinary general meeting to be presented with other options for recovering their investments, as long as it was not in cash.
8. Simple Homes
Simple Homes was established in October 2015, it began operations as a developer, selling houses off-plan through a tenant purchase scheme. Under this scheme, buyers were required to first join their cooperative and pay a 2,000 shillings admission fee, followed by a 25% deposit for the houses in various locations such as Syokimau and Kitengela.
After this, they would pay monthly installments equivalent to their current rental rates, with rates as low as 24,000 shillings per month.
The prices of the houses were fixed and no interest was charged. Buyers were to move in immediately after completion and could pay off the remaining 75% over a period of 5-40 years.
However, the company did not take members to the construction sites, was not registered with any developer bodies, and when clients inquired about the progress and requested site visits, the company shut down operations and their online activities in February 2017.
Local newspapers have reported that investors and homebuyers in the scheme have lost millions of shillings. The Directorate of Criminal Investigation has since begun investigating the matter.
9. E- Firm Housing.
E-Firm Housing claimed to have partnered with an Israeli company specializing in agribusiness and decided to venture into smart farming. The company later suspended operations. The reasons cited for the suspension of E-Firm were that the government prohibited it from entering the agribusiness sector, even after it invested millions in the construction of greenhouse structures. The state argued that the company was only licensed to operate as a housing cooperative.
At the time of its suspension, 1,500 Kenyans had invested billions of shillings into the company, which had promised them millions through "digital farming." The society collapsed and the offices were closed due to disputes among the board and among investors.
10. Lesedi Developers
Lesedi developers have been the latest in the lime after investors claimed to have been sold non-existent plots in Juja, Kiambu, and Nakuru. The company was founded in 2017 and has focused on purchasing, developing, and selling both residential and commercial plots, as well as houses in prime locations.
The media reported increasing worry among the company's clients who hoped to receive a refund for the money paid to acquire plots in various locations.
The director has already started another company (Tunza Relators Limited) while reports of embezzling 1 billion shillings from clients are still ongoing, which worrys the investors more as it is normally the norm of these fraudulent realtors.
Conclusion
Investing in real estate can be very complex, and even experienced observers may have trouble identifying potential scams.
It is important to thoroughly research the person or firm offering the investment opportunity before investing your money. The best way to protect yourself and detect fraud is to do your due diligence. Additionally, if the deal seems too good to be true, it probably is.
Don't let yourself be a victim of a real estate scam! Share your story in the comments below and help others avoid losing their hard-earned money. Have you been affected by any of the schemes mentioned above? Tell us about your experience and let's work together to protect ourselves from these fraudulent schemes.
