- But before would-be homeowners rush to court to sue their real estate agents after land deals go wrong, a number of impending factors signal a financial fraud on the way.
- Most real estate firms, it turns out, are used to paying only a small percentage of the full price of land to vendors, then they go out marketing them to clients.
Speculation. Supposition. Conviction. Distrust. Such are the experiences of many Kenyans when they set out investing in real estate, an industry marred by fraudsters.
But before would-be homeowners rush to court to sue their real estate agents after land deals go wrong, a number of impending factors signal a financial fraud on the way.
Mr Moses Muriithi, who began his entrepreneurship journey back in 2016, learned such hurdles when he went to buy land, prompting him to start a company.
Most real estate firms, it turns out, are used to paying only a small percentage of the full price of land to vendors, then they go out marketing them to clients.
After paying the deposit, they are given access to the land where they now fence it and install beacons. They then advertise it as agents. The money they get from selling is used to clear the balance and keep some profit. But oftentimes, that does not happen.
Such style of doing business, according to Mr Muriithi, Fanaka Real Estate chief executive, is the root of all the muddle witnessed in Kenya’s property industry, as most of the time, agents who maintain a large portfolio of such unpaid parcels of land find themselves in trouble with their clients.
“That is why you are told to wait for a title deed within six months. Most of these firms do not own the land, so it’s a long process to transfer the land from the vendor, subdivide it into plots and process a title deed for you. Sometimes it even takes up to two years for clients to legally own the land,” Mr Muriithi told Enterprise.
He calls it an unsustainable business model, as most agents that purport to be real estate firms are dishonest. Once they sell a parcel of land, they do not clear with the vendor first, they move to a new zone and place another deposit and start marketing it.
Once the payment period with the first vendor lapses, the agents risk repossession of the land by the owner, putting unsuspecting land buyers in a tough predicament where they have to wait for several years to own what they paid for.
“You will hear of trespass scuffles between people who thought they had bought a piece of land and those who say the agent never cleared with them in many prime areas. The sad thing is that this is rampant right now,” adds Mr Muriithi.
Before committing their hard-earned cash to land ownership, Mr Muriithi advises, potential buyers, must first ask the agents for a copy of the title deed so they can search it in the Lands registry to ascertain whether the company is the legal owner of the land they want to buy.
When they take you in rounds, telling you they are processing it with their lawyers, that should be a warning sign that they only want your money, he explains.
To make the deal good for you, he says they will make the payment plan so flexible to you that you may only be asked for a deposit of as little as Sh50,000 for a plot worth Sh1.2 million.
“Even some have the audacity to build nice houses for sale on a large piece of land that they don’t own. Then they market it as a gated community and many people fall into the trap.”
For Penninah Mueni, who bought a 100 by 100 plot back in 2018, it has been a cat and mouse game between her and her agents.
“I paid the full amount of Sh800,000 but was told to wait for six months. The fact that I am still waiting is killing me inside. I may never own that land,” a downcast Penninah says.
Mr John Mutua, looking to secure a home for his family and free himself from monthly rent payments fell prey to a land selling agency that asked for a deposit of Sh100,000 only and pay the rest in installments.
“If I were better informed, I would not have lost Sh300,000. I paid Sh50,000 for four months before I realised many people had been scammed by the agency,” John says in despondence.
This month, his company will be celebrating in the property business.
“At Fanaka, we purchase the land first to own it. Then we subdivide it into plots and generate title deeds before marketing it to clients. That means a client can get their title within days. That is how we are restoring trust in the industry,” he said.
To succeed in the business, he adds, realtors must be consistent in terms of honesty and trust.
“If customers realise you are prone to corrupt deals they will give you a wide berth.”