A seven-storey building in Nairobi leased out for nearly a decade to the ruling Jubilee Party was on Monday put up for auction, with the bank targeting raising Sh435 million from the prime property.
Stanbic Bank Kenya, a unit of South Africa’s Standard Bank, is seeking to recover the millions of shillings over a debt that fell into default last year, people familiar with loan say.
The building, which sits 0.56 acres, is associated with a former top official in the administration of President Daniel arap Moi and who served as MP in the Rift Valley.
The Business Daily was unable to establish the size of the unpaid loan in an economy where a number of prominent personalities have fallen into hard times as they battle auctioneers over unpaid bank loans.
They are struggling to hold onto their prime assets over mounting bank loans as Kenya’s economy slows down and repossessions pick up.
The Nairobi office bloc, which was Jubilee party’s centre of operations in 2013 and 2017 elections, will be sold when the auctioneer’s hammer falls on September 13.
However, in 2021, the buzz of activities in the party scaled down after the fallout between President Kenyatta and Deputy President William Ruto.
“All that parcel of land known as LR no 209/1530 Emani Business Centre along Thika Road, Pangani area, Nairobi County registered in the name of Farmers Industry Limited, g/t... Florence Wairimu Mbugua,” the auctioneer said.
“Bidders will be required to produce a bidding deposit of Sh5 million by way of cash or bankers cheque before being allowed to bid.”
In 2018, the then Jubilee party deputy secretary Caleb Kositany claimed the party was paying about Sh90 million in annual rent for the seven-storey building.
Default on mortgages have jumped in recent months, pointing to widespread distress in the real estate sector as Kenya’s economy recovers from Covid-19 economic hardships and property auctions pick up.
Bank loan defaults have crossed the half-a-trillion shilling mark for the first time, setting up thousands of borrowers for property seizures in an economy hit with reduced cash flows and inflation that has squeezed household budgets and demand for goods.
The latest Central Bank of Kenya (CBK) data shows that defaulted loans rose by Sh30.6 billion in June to Sh514.4 billion -- the sharpest monthly increase in recent history.
A severe drought, surging inflation that has hit demand for goods, scarce jobs and prolonged political uncertainty in the wake of the disputed presidential vote have created a growing pool of distressed borrowers whose assets are being seized by newly aggressive lenders.
Industrialists have complained of reduced demand following the sky-high inflation and the onset of the election season.
Inflation hit a 62-month high in July at 8.3 percent on the back of a jump in the price of essential items like cooking oil, food, fuel and soap, squeezing household budgets and demand for goods and services.
This has forced many households, especially in the low-income segment, to reduce their shopping basket in an environment where firms have frozen salaries as they recover from Covid-19 economic hardships.
Auctioneers say asset seizures are up this year, but they are having difficulties selling the assets in a market witnessing a glut of repossessed vehicles, land, homes and office equipment. This underlines the cash crunch in the economy.
Commercial banks are shunning forceful auction of property seized from loan defaulters in favour of private settlement after Kenya’s soft economy slashed asset prices below the minimum bid value set in law.