Nearly half of Kenya’s real estate firms not regulated

While the sector’s growth has been evident, however, so have been cases of consumer violations where lifetime savings of thousands of Kenyans have vanished as some companies went under.

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Nearly half of real estate companies in Kenya are unregulated, a new report shining light on some of the reasons that could have caused growing customer complaints in the sector has revealed.

The Real Estate Survey report 2023-24 reveals that 47.1 percent of the real estate firms are not registered with professional and regulatory institutions, mainly because they see it as unnecessary and not beneficial.

The Kenya National Bureau of Statistics (KNBS) targeted all establishments engaged in real estate activities in the survey that was undertaken from March to May 2024.

“The results indicate that 52.9 percent of real estate firms were registered with...professional or regulatory body in the country while 47.1 percent were not registered with any professional or regulatory body in the country,” says the KNBS in the survey.

The survey shows that the majority of the registered real estate firms (88.1 percent) are registered with the Estate Agents Registration Board, 40.7 percent with Valuers Registration Board (VRB) and 33.9 percent with Kenya Valuers and Estate Agents.

This leaves about one in every two real estate firms operating in an environment without checks and balances, at a time when the sector has had growing cases of customer complaints mainly where companies have gone under after collecting millions of shillings from Kenyans with a promise to develop properties.

While KNBS notes that registration with professional and regulatory institutions enhances professionalism, discipline and consumer protection among players in specific sectors, the survey reveals that almost half of the players in real estate have stayed out.

“The most cited reasons by real estate firms that were not registered with any professional body or regulator body was lack of interest (33.6 percent), not viewing registration with professional or regulatory bodies as necessary (31.8 percent) and cumbersome nature of the registration process (10 percent),” the survey states.

It adds that 6.4 percent of real estate players who have not registered said the reason we because they were not eligible, 4.6 percent cited “too many regulations” and 3.6 percent said it was expensive.

Kenya’s real estate sector is one of the most vibrant in the country with an average 8.9 percent contribution to gross domestic product.

The sector’s output increased by 33.7 percent from Sh946.7 billion in 2019 to Sh1.26 trillion in 2023.

“The growth in the sector has been supported by infrastructural development such as roads, utility connections, rapid urbanisation, better returns on investment in the sector and several government initiatives towards affordable housing,” said the Kenya National Bureau of Statistics.

While the sector’s growth has been evident, however, so have been cases of consumer violations where lifetime savings of thousands of Kenyans have vanished as some companies went under.

In the year to June 2023, the Competition Authority of Kenya (CAK) pointed to the sector as among those that had witnessed growing complaints of consumer violations.

“There was an increase in the number of cases investigated across sectors, with complaints being received from new sectors such as real estate (housing), arts recreation and entertainment and water supply,” said the CAK.

The sector has also been among those with high cases of loan defaults, with the Central Bank highlighting it among sectors where banks planned to intensify recovery efforts last year.

The survey also covered real estate activities such as real estate agents and brokers, intermediation in buying, selling and renting of real estate on a fee or contract basis as well as management of real estate on a fee or contract basis.

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Note: The results are not exact but very close to the actual.