Welcome to SquareFoot Real Estate
There is a silent but profound panic among real estate buyers in Kenya’s market. This comes after one of the pioneering real estate development company short-changed their customers. Indeed there have been many others but they didn’t get much media focus. The unfortunate events that bedevilled the affected customers have cast a shadow of doubt on all Kenyan property developers with the million-dollar question being; can we trust Kenyan developers?
The real estate market has for a long time been dominated by a few property developers. Nevertheless, as the market began to boom, fueled by the ‘me too’ mentality, the number increased with everyone gunning for the lucrative returns that are usually associated with the sector. However, the majority of the new developers entering the market didn’t have the capital required to sustain real estate projects which are often a capital intensive venture hence fewer players. In light of this, some of the developers opted to rely on off-plan sales to fund the projects. Their idea is to use the sales revenue to build projects from start to finish investing little or nothing and reaping the supernormal profits at the tail end.
From the face value, it sounds like an ingenious plan but it’s completely impractical because the real estate market in Kenya is dominated by single-unit buyers instead of bulk buyers that is typical of real estate investors. As a result, the projects sell much slower yet project timelines have to be met given that some clients had already committed by putting down payment. In the end, it ends badly both for the developer and the buyer.
Further to this, there is also a crop of developers who after the successful sale of their first project, they over-commit on multiple concurrent projects with inadequate financing. In the end, they fail to deliver on all the projects due to cash flow issues. Others, however, are just outright frauds who are out to swindle buyers of their hard-earned cash without any guilt whatsoever. So, in the face of these cases, should we continue trusting Kenyan developers?
There is no doubt that the story of the pioneering real developer failing to deliver on their promise has portrayed all the developers in the market in a bad light, destroying the reputation of the industry in the process. However, there are good developers who are dedicated to building and delivering great projects. Thus, every property development company should be judged on its merit and it would be quite unfair to paint all property developers with one brush of untrustworthy.
In a typical mature real estate market, solid developers are self-funded and don’t rely on off-plan sales to fully fund construction of their projects. Off-plan sales usually provide buyers with an opportunity to buy units at greatly discounted prices. The unit prices increase gradually as the construction progresses. Therefore, off-plan sales is still a great deal only that you need to sign up with a developer who is trustworthy and has shown all the signs of integrity. However, as a precautionary measure against a developer defaulting, have a watertight contract that would protect your money should the developer fail to deliver. Also, carefully check the credentials of all the involved parties – the developer, the contractor, the management company, the financiers, etc. to ensure everything is okay. Once you pay, visit the site regularly to see progress and should they stop construction raise it immediately with the developer to give valid reasons why they have stopped.
For us at Square Foot Real Estate, we are keen on delivering on our promises and projects beyond perfection. Our latest project, 108 Sapphire Apartments in South B, Nairobi is financed by a mix of equity and bank financing so as a potential customer, you don’t have to worry about the project stalling. Construction is ongoing and the apartments will be completed in about 18 months. We are open every day of the week from 8 am to 5 pm, so you can arrange for site visits to inspect project progress.
Granted, while trust is nowadays in short supply, you can still trust Kenyan property developers. There are many out there who have remained sincere, true to the cause, and continue doing good work. The actions by the few dishonest developers have taken a great toll on the market in general especially for new developers who are on their first projects. The more established developers with multiple project portfolios seem to be riding out the storm. However, unscrupulous actions of a few rotten apples in real estate development shouldn't destroy the amazing work that has been ongoing since the early 2000s. However, all said and done, it comes down to trust and due diligence.
The views expressed here are of the author and do not necessarily represent the position of Square Foot Real Estate Ventures Limited and as such does not warranty any particulars.