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Posts Tagged ‘property’

The joy of almost owning an apartment has rapidly given way to fear and apprehension as the suraya property grouped seemed to slide into a quagmire of litigation. Anybody who reads the papers is definitely aware of the Fourways saga whereby the original land owners felt shortchanged in a deal that made them equity partners through providing the land to build the estate on.

What followed was a legal drama that could easily set precedents on how people in Kenya buy property. The reason I say this is because here were hundreds of people who have paid deposits on the property or even completed there instalments and were due to take possession of the houses and apartments, but were cut short by a court injunction that shut down the whole operation, for a few excruciating weeks, and left everyone worried.

The problem is that if the business crashed all the investors would lose all the money already paid out to acquire their part of the estate, at best we would spend years trying to get it back. This is because developers here use the deposits from buyers to start and often complete their projects. This is a highly risky thing for the man on the street like me and was informed by friends that actually in south Africa your initial deposit goes into an escrow account that the developer has no access to until the completion of the project, therefore they are not allowed to rely on deposits to get their projects going……..they must have completed their financing beforehand!

As the legal tussle amongst the developers ensued, I won’t bother with the details, it became obvious there will be a delay in completing phase one of the four ways estate and that means guys like me in Phase 2 are basically screwed. My sales agreement says completion date is April 2012. Now we are looking June 2013 as the estimated completion date for Phase 2.

And yes I am pissed off!!! The sales agreement makes allowances for almost any type of delay and I doubt I can be compensated. Even worse they have been holding my deposit for a year now plus another eighteen months to go…………..interest free!!!!! The law needs to change and soon.

As for the change mortgage interest rates as I sit out the delays……………..this will be the subject of my next property post.

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With the enthusiasm of a child who has grasped the handle of a brand new toy, I savoured my ‘find’ of a 3 bedroomed, spacious apartment in large grounds on Kiambu road. It fitted the bill of all the features i so desire in a property that i would love to own.

I immediately got in touch with my bank, barclays with whom I had already had preliminary discussions. They gave me a list of requirements the length of my arm, just so they could appraise me:
passport, work permit, contract, renewal of contract letter, letter from employer, 3 months bank statements, 3 months payslips, tax PIN card, CV. They forgot to ask for the serial number of the kitchen sink.

Two weeks later i got a prequalification offer, they could give me 90% financing on the property, but it would have to be 90% complete at the time of valuation.

And there in lies the dilemma. Where in nairobi do you find a block of flats that are 90% complete and still available for puchase? If there are any available then there is definitely something wrong with them: undesirable location, too close thhe road, 6 floors off the ground and no lift, gabled roof cutting though the living room or simply lousy finishing.

The mortgage officer listened to me rant about this and politely suggested I look elsewhere, Kilimani perhaps? I was livid simply because I should be the one to choose where and how I want to live and being patronised by the banker was not going to fly.

I called a contact at standard chartered had a quick chat, liked what I heard. And had another chat with a a KCB mortgage officer and was happy about them too. So because the sales rep from the developer said most of their clietns get there mortgages from KCB, they finance the project, I chose to secure a mortgage with them This entailed me submitting the whole nine yards of documents, again!

A heady 2 months later the letter of intent was ready from KCB, however demanded that I immediately pay the 1% loan processing fee, submit the sales agreement, show evidence of the stamp duty being paid, open an account and remit 100,000/- a month etc. I was stunned! The letter was clearly for property that is ready for occupation, not one that would not be ready for another 18 months! The worst part was that i was offered an interest rate 13.5% for ten years and i had negotiated a rate of 12%!!!!!! Two months wasted.

I called the mortgage officer and ranted and raved, politely, about the clauses in the offer letter. She, tongue in cheek, told me that they could not offer me 12% interest rate because I was not asking to borrow more than 10 million/-!! Why on earth did they not say so before????? She went to tell me that the interest rate does not matter as lomg as I pay more than the minimal monthly payments……’its on a reducing balance you see’.

As for the other caluses she told me that They, the bank, would ignore them. They would ‘kick in’ only when the apartment was complete and ready for occupation. The fact that the agreement was a legal document with a clause that allows the bank to cancel the offer if i did not pay or do all that i signed and agreed to, in 3 months!, was lost on her. She just giggled and said all their clients sign off on that.

I needed to find another bank…..fast!

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 Searching for residential property in Nairobi is a game of musical chairs and may be a needle in a haystack. There is plenty on the market, but one needs to know exactly what they want to avoid going on a wild goose chase.

 I set a couple of parameters for myself:

 First, I will not pay insane prices for anything. I do believe we live in a property bubble and the laws of physics dictate that it will burst. Why everyone thinks that rule does not apply to Kenya is amazing and Alan Greenspan aptly labelled them ‘irrationally exuberant’. That said buying property in Kilimani, Kileleshwa and Lavington was out of the question considering that a 2 bedroom apartment in these areas starts at 10 million shillings ($ 125,000).

 Secondly, I will not live in a concrete jungle. This is a very high standard to set when all around are property developments consisting of tightly packed apartment blocks and town houses. The first things to get cleared are the trees and later a concrete slab is laid out on the ground leaving fingernail sized patch of grass to represent  a garden. Why on earth do we accept to pay top dollar for high density housing? I say that because quite often one apartment’s kitchen looks straight into the next block’s living room.

 Thirdly, I do not wish to do a long distance commute, even if the city is laying down of massive highways and by-passes that promise to relieve Nairobians from nightmarish traffic jams. So the brand new suburbs of Athi River and Kitengela are not an option.

 Fourthly, I will think twice about developments with silly names: ‘the paddocks’, ‘euro oasis’, ‘tiara villas’, ‘oyster paradise’, ‘brooklyn paradise’, ‘revlon greens’ are examples of how ridiculously some estates are branded. We are a metropolis, 400miles from the sea in the heart of Africa.

 I dared to believe I could find something really nice that was fairly priced, spacious and with greenery.I had to wait a while and in frustration I drove up Kiambu road and stumbled on a development on the junction of the Northern by-pass, and it ticked all the boxes. Set on 200 acres there is plenty of space and greenery. Phase 1 was sold out and I quickly set my eyes on securing a spacious three bedroom apartment in phase 2, price 8.2 million!

The other attraction was the professional sales staff who took me around the project. Now if you have ever been property hunting in nairobi you will hae realised that  more often than not the guy who shows you around expensive real estate is the watchman!  Who, god bless his soul, can’t tell you the floor area, the rates payable, estimated service charges, legal costs and preffered mortgage providers. Its the equivalent of the doorman at DT.Dobie talking to you about the latest mercedes 500 SLK!!

 I consider the estate I have found an amazing find, but here is one big catch, its off Kiambu road, otherwise known as ‘car jackers alley’. Almost everyone I know was dead set against me buying property there, security or the lack there of was the primary concern.  But I like everything about the location: its close to the northern by-pass, its next door to Windsor hotel and country club  (I can pretentiously say I live in Ridgeways…almost), village market is close by, phase 3 includes a mall and lots of developments are planned for the area. My gut feeling is property values will rise in a few years time.

 I signed on the dotted line to book the apartment with the expected completion date being April 2011. The developer demanded 10% deposit to secure the booking. It is a leap of faith because they had not broken ground on the Phase 2 and I was essentially buying the apartment ‘off plan’, hence the attractive price. The only consolation I had was that the developers have a great track record. And with that done I went back to speak to the bankers……………

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Having lived in this fair city for more than five years I have had the urge to ditch my rented digs and join propertied ranks. Granted that I have a nice apartment and I pay below average rent for it, but the feeling of owning one’s own roof is intoxicating. The ghettofication of my neighbourhood is a story for another day

 Desiring an apartment is one thing, getting it is another. The path for a non Kenyan is a slippery one. First step is to get the bank to trust you and that is a really big step considering that all resident aliens are automatically classified as ‘high risk’, regardless of your occupation, status or length of stay.

 Many a time have I been cornered by sales men hawking bank loans, they trawl through my work place all the time. I fit the ideal profile for a loan, or so they all think until I tell them I am Ugandan. Hell freezes over, the smile is replaced with a stressed twitch of the lips and then the demand for excessive amounts of paper, documents, leases and more paper……just to borrow a measley amount.

 Please note that loan repayment periods can only be as long as your contract, so with most of us on 2 year renewable ones, you get the idea that large loans will mean large monthly repayments. Now imagine a mortgage. I recall a hilarious conversation I had with my bank manager where I basically asked her how my mortgage can be considered high risk given that I can’t take the apartment back to Uganda with me when I leave! To her credit she was embarrassed and agreed that the terms were unreasonable.

 Well I decided that I needed to take the bull by the horns and fight to own property in this boom town. But I decided, last November, to first determine how responsive the banks would be to my application.

 My bank, Barclays, said they cold give me a mortgage at 13.5% at a maximum duration of 2 yeas! Then they changed their mind and said that since I had lived in Kenya continuously for more than 5 years they cold offer me a 7 year mortage. And when I whispered that I was talking to Standard Chartered bank, they increased the mortgage duration to 10 years.

 A friend gave me a contact in Housing Finance Bank and she was corteous and efficient. She had handled mortgages for non Kenyans and it is a straight forward process, particularly for salaried employee types like myself. She quoted a 10 year mortgage at 14%.

 Standard chartered sent someone over to chat with me and the terms were similar and they also did not seem fazed by the fact that I was a foreign resident. Which made me wonder what the heck was the matter ith Barclays, after all I have been their customer for 8 years!!!!

 Another friend gave me a contact in Eco bank, the new west African entity in this market. And they were all business. They guy told me that they deal a lot with non citizens and they have products directed at this segment of the market. He offered a mortgage for 10 years at 15%. The key here was that it was negotiable!!! They could even increase the duration of the mortgage to 15 years.

 It then dawned on me that I was actually seeking a mortgage from a position of strength and also that the banks need the business. We often approach the bank like a lamb to the slaughter . I do recall a close friend telling me how he never pays the quoted interest rates or bank charges, he always haggles for a better deal.When we play tough and demand more from them we should not be surprised when they respond favourably.

 The next step was now to locate a suitable piece of real estate to buy.

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