Habib Bank branch in Nairobi. The lender intends to auction 8,408 acres of land owned by real estate firm Zumzum Ltd to recover the outstanding debt of Sh216,951,661. Photo/FILE
What you need to know:
Habib Bank Limited intends to auction the property owned by Zumzum Ltd to recover the outstanding debt of Sh216,951,661 after Zumzum’s sister company, Akaba Investments Limited, defaulted in repaying the loan.
Justice Mary Kasango dismissed Zumzum Ltd’s application to restrain Habib Bank Ltd from selling the property for Sh312 million, arguing that the price is below the market value.
Zumzum, however, argued that the bank would be unjust to undervalue the property at Sh312 million.
The High Court has given a bank the green light to sell 8,408 acres of land used by a Mombasa-based real estate firm as a security to secure Sh217 million loan.
Habib Bank Limited intends to auction the property owned by Zumzum Ltd to recover the outstanding debt of Sh216,951,661 after Zumzum’s sister company, Akaba Investments Limited, defaulted in repaying the loan.
Justice Mary Kasango dismissed Zumzum Ltd’s application to restrain Habib Bank Ltd from selling the property for Sh312 million, arguing that the price is below the market value.
The judge ruled that Zumzum, owned by a group of business magnates, had not sufficiently proved that the price is below the market value of the property.
Justice Kasango concurred with the bank’s submission that it has a statutory power to sell the suit property to recover the Sh216,951,661 loan that Akaba Investments Ltd had borrowed.
Zumzum, however, argued that the bank would be unjust to undervalue the property at Sh312 million.
The court analysed sets of valuation reports presented by both parties to establish whether Zumzum had satisfactorily demonstrated that the land is valued above Sh312 million.
In support of its claim that the property was undervalued, the real estate firm produced in court two valuation reports. The first one valued the land at Sh840 million in 2009 on possible sub-division into 700 plots and setting side 20 per cent for road network, open spaces and service use.
The second valuation report of Sh560 million done in 2013 was based on the current status of the property without subdivision.
Habib Bank presented three valuation reports prepared by Tysons Limited with the first one prepared in 2009 showing open market value at Sh260 million and forced sale value at Sh200 million based on sub-division of the plots.
The second and third value reports, all prepared in 2013, placed the value of the property at Sh463.4 million on subdivision and Sh390 million if sold as a block.
The judge ruled that Habib Bank’s valuation reports prepared by Tysons Limited complied with section 97(2) of the Land Act, 2012, which requires that a forced sale valuation be undertaken by a valuer.
She indicated that Zumzum Ltd had failed to prove its claims that the 8,408 acres of its land were above the bank’s valuation of Sh312 million and was not the best price reasonably obtainable for such land.
Justice Kasango further ruled that the real estate firm’s two valuation report prepared by Kiliru and Company Valuers and produced in court had not complied with section 97(2) of the Land Act, 2012.
“In my considered view, the plaintiff’s valuation reports are not the best guide for purpose of arriving at a fair value since the same only contain the open market value and not the forced sale value of the property,” she said.
“There is no evidence placed before court to prove that the defendant has given the auctioneer instructions that Sh312 million be reserved price during the auction. The plaintiff’s claim that the defendant intends to sell the suit property a lower value is therefore, in my view, merely speculative.”
