Unco-ordinated Real Estate Sector
Is it time for a real estate regulator? This was the question left on the lips of me and a colleague after a long exchange and i this was the analysis.
A Block of Residential Apartment in Nairobi
Real estate is one of the fastest growing sectors of Kenya’s economy today because housing has become the most preferred investment asset among households and other investors. However this enthusiasm has come with a number of challenges; among them:
- Substandard constructions;
- Collapsing buildings;
- Delay in project completion;
- Delay in getting the necessary consents, approvals and/or documentation;
- Financial loss (deposits or entire amounts);
- Unplanned estates and urban sprawl;
- Irregular acquisition of public land;
- Undocumented investors;
- High property prices;
- Bad investment decisions as a result of limited information or poor advice;
- Disputes and protracted litigation.
Numerous players provide goods and services to the sector. They range from government departments, local authorities, financial institutions, developers, professionals, brokers, advertising agencies to building materials suppliers.
Professionals in the sector operate under different umbrella organizations which regulate members’ activities. However a sizeable number of “consultants” are not registered or licensed to practice. This has caused disjointed activity within the sector leading to confusion, losses, frustration and apprehension among potential investors.
Is it time the government steps in and sets up a regulatory body that will act as a reference bureau and also provide guidelines for orderly, transparent and efficient management of the sector?
If constituted, such a body should be an independent entity with representatives from all stakeholders and be charged with the responsibilities of ensuring that:
ü Buildings are constructed and completed as per approved plans and specifications;
ü New developments have the required approvals before construction commences;
ü All constructions are supervised by registered and licensed professionals;
ü Developers meet completion timelines;
ü Scrutinize title documents and provide advice to potential buyers;
ü All service providers are registered with respective professional organizations;
ü Standard operating procedures are set;
ü A website is set up where service providers are listed;
ü All agents are vetted and all properties being offered for sale;
ü Data on property transactions and investors’ details are kept;
ü Research on real estate is carried out and a journal produced periodically;
ü A property market performance index is prepared;
ü Complaints in the sector are attended to expeditiously;
Some members of the public believe the establishment of such an authority will ease public anxiety and restore confidence to the sector.
Professionals agree that research and preparation of a property market index will make property investment decisions more analytical and economic fundamentals oriented rather than market perception driven as is the case today. Some are of the view that a regulator is critical for the success of the proposed Real Estate Investment Trust companies in Kenya because investors will require comprehensive information from trusted sources; otherwise they may shy away.
That’sall….. *with a Meryl Steep Accent*
© 2010
Well said. As property developers continue to ride the wave of the housing boom they need someone to remind them that all booms bust in the end. A regulator would be great. Cheaper loans would help too. And let’s not forget about public housing. I say it is time the city did away with the railway estates along Jogoo Rd. and constructed affordable high rises.
keep up the good work Felix.
KOO
True,adequate public housing,and preferably highrise blocks,would serve as a reprieve to the state of inadequate housing while putting a cap on the skyrocketing house prices.But there is light at the end of the tunnel as the city undergoes urban renewal.
Thanx for your thoughts and encouragements.
Felix has your view of the real estate sector changed in line with the recent developments namely the piracy money that is supposedly being pumped into the Kenyan economy from Somalia?
Well,first if it were in my jurisdiction,i would dispel the wide held claims that Piracy money is single handedly affecting the Kenyan real estate scene.
Its true,piracy money has found its way in kenya’s property markets, thanx to the non-existence of AML Laws until recently.One must appreciate the fact that Kenya has long been a hub for money laundering,mainly due to its geographical location and weak relevant legal framework.Just look at the increased cases of drug trafficking,gun running,organized prostitution and other forms of racketeering.do you hear piracy anywhere.
This laundered money distorts the markets by affecting the economic variables of demand and supply.
So to answer your question,partly yes,because it adds up to the total money from outside the banking system(laundered money).That’s why the bubble burst might not happen in the near future if things remain the same.
What the hell is your speciality…??? You seem to commenting on all and sundry, man..! For what it’s worth, if you want to be a good blogger, settle on one field of knowledge and don’t speak unless you know something…
I take your comment with a pinch of salt…i just hope i didn’t step on a raw nerve in any of my posts.Actually i thought of deleting your comment when it came up for approval but on second thought decided against it …i welcome criticism(esp. if its “constructive”)
As for my specialty well i am not the one to limited by set boundaries,if it hurts you am sorry.Maybe ill change my mind in future…
…..thanx to technology i know who you……anyway use your real name next time
Thank you for your comment and criticism.