Columnists

New properties Act to boost the appetite for apartments

apartment

Apartment blocks. FILE PHOTO | NMG

Summary

  • A recent report by one of the country’s leading real estate consultants shows that in 2001, apartments took up 23.5 percent of the market but by December 2019, this had risen to 61.1 percent.
  • Despite the rapid growth in demand for apartments, the law did not allow buyers to get title deeds for the property as the developer retained the original paper even after selling the units as it was legally impossible to sub-divide the same.

Due to rising property prices, homebuyers have gradually been shifting to affordable types.

Today, many Kenyans are opting for cheaper properties outside major cities or going for apartments.

A recent report by one of the country’s leading real estate consultants shows that in 2001, apartments took up 23.5 percent of the market but by December 2019, this had risen to 61.1 percent.

Despite the rapid growth in demand for apartments, the law did not allow buyers to get title deeds for the property as the developer retained the original paper even after selling the units as it was legally impossible to sub-divide the same.

This exposed investors to the risk of fraud and loss in instances where developers would build on land whose title was held by money lending entities.

The Act is faulted for being inconsistent to the provisions of the 2010 Constitution and also to new land regimes contained in the Land Act No. 3 of 2013, and the Land Registration Act No. 6 of 2012.

It is further criticised for not being sensitive and responsive to the emerging market needs such as increasing demand for housing, mixed use, and master planned communities as well as efficient mortgage transactions.

Approval of the Sectional Properties Act 2019(The new Act) last year now means that apartment buyers can finally acquire title deeds. Among other privileges, the law will give them greater transaction ability in financing and disposal of properties in the market. This is expected to address doubts by Kenyans who were hesitant to buy apartments because of the loopholes in the sectional property law.

The new Act guarantees rights of property owners by conferring absolute rights to them.

Registration of the sectional property would lead to issuance of new titles for each unit (Certificate of Title or certificate of lease depending on the property). Previously, absolute rights were vested on the management company leaving unit owners at the mercy of property developers.

The new Act also provides for closure of the mother title or head lease to prevent mischief by property developers. This means each unit holder will have his/her own title.

To realise the above, the new Act simplifies the process of registering sectional properties and creates an enabling environment for investors of affordable housing and subsequent buyers, leading to increase in uptake of properties.

The process for developers and buyers would start by registration of the property by the developer as a sectional plan with the registrar and the issuance of new titles for the newly established units under the plan.

This would then be followed by transfer of the titles to the respective buyers who would own the properties absolutely. Furthermore, independent and complete ownership will give financial institutions greater incentive to lend to apartment owners since charges can be placed directly on individual titles.

The new Act allows individual unit owners to renew their own leases as end purchasers. This would expedite the process of applying, processing the extension and renewal without applying through the corporation and management companies.

The Act also eases the approval by the county governments as opposed to the local government in the previous regime. This creates an enabling environment for investors and property owners

The bill would affect the prices in that the titles would be more secure and reliable unlike before leading to the increase in demand for sectional properties and thus the increase in prices.

The law would affect mortgage providers positively in that, individual titles encumbered would be independent. The provider would be affected where the mortgage was on the strength of the mother title.

Kenya has an annual housing demand of 250,000 units with an estimated supply of 50,000 units. Due to the high costs and scarcity of land in the country, sectional titles are likely to increase in popularity and play a bigger role in accelerating property development and home ownership in the country.

Stella Mutai NCBA Bank – Head of Retail Property Finance.