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Real estate regulation Bill can build sector with reviews, adjustments

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The debate on whether real estate development and built sector in Kenya should be regulated is not new and the sector is also no stranger to regulation. PHOTO | SHUTTERSTOCK

In May, the Senator of Trans Nzoia County, Allan Chesang, sponsored the Real Estate Regulation Bill. The Bill draws heavily from the Indian Real Estate (Regulation and Development) Act of 2016 (RERA), which regulates India’s real estate and property market.

Kenya’s real estate market is estimated by Statista to be worth $7.91 billion (Sh1.2 trillion) is dwarfed in comparison to global giants like India’s $265.18 billion (Sh39.8 trillion) market.

Real estate consumers in Kenya have faced a myriad of challenges such as unavailability of complete and reliable information in respect of the property they are dealing with; defective titles; fraud and lack of accountability from some developers on project delivery; mismanagement and diversion of funds collected on account of purchase price, among others.

The debate on whether real estate development and built sector in Kenya should be regulated is not new and the sector is also no stranger to regulation.

Multiple laws already govern aspects such as access, ownership, use and administration of land and the conduct of real estate professionals. However, there has been no tailor-made consumer protection legal framework.

Considering that all prior efforts have been piecemeal attempts, the Bill proposes the first wholesome approach to regulating real estate. It proposes the establishment of a Real Estate Board to among other things regulate, register agents and projects.

Noteworthy features of the Bill include mandatory duties and obligations on developers, restrictions to variation of the approved building plans without the prior written consent of purchasers and obtaining the prior written consent of at least two-thirds of the purchasers prior to the transfer of a project to a third party.

The Bill further proposes an unusually lengthy defects and liability period (DLP) of five years from the date of the project delivery, within which period a developer will be liable to rectify any defects notified by a unit owner no later than 30 days of receiving a complaint.

Perhaps most innovative is the proposed control of investor and development funds. The Bill also proposes the rights and duties of purchasers.

While the Bill is consumer-centric, its suitability to the Kenyan real estate sector is questionable and may require a great deal of adjustments before it is published into law. The introduction of RERA in India is considered to have led to an increase in prices by developers and agents as a response to the increase in legal risks and compliance costs.

Ann is a partner and the Head of Real Estate and Finance Practice at DLA Piper Africa, Kenya and Maureen is senior associate in the same practice.