Individuals looking to purchase houses in Kenya are increasingly avoiding off plan properties in a move that has considerably undermined the growth of the country’s real estate sector.
According to a new study by Sagaci Research and McKinsey, about 75 per cent of Nairobi residents would only consider buying a ready-to-occupy house as opposed to acquiring an off plan home.
Most of the 400 respondents cited lack of accurate information on the final product and developer trust issues as the main reasons for avoiding making off plan purchase in Kenya.
Ordered by Actis and Shapoorji Pallonji Real Estate – ahead of next month’s launch of their Sh12bn housing project in Nairobi, the study revealed that most Kenyans prefer to use their savings to finance their home acquisition.
“70 percent plan to use their personal savings to finance their purchase and only 30 percent will obtain a mortgage,” said the survey.
Off plan developments, which were previously popular due to lower prices and flexible payment schedules, have recently come under pressure due to missed deadlines and poor quality of houses.
Suraya Group was, for example, a subject of hard-hitting conversations last month after many of its projects fell behind schedule due to a liquidity crisis that has hit the company in recent years.
The company, which was founded in 2006 by Pete and Sue Muraya, said it was adversely affected by interest rate caps, introduced in 2016, uncertainties of the 2017 polls and macroeconomic factors such as rising inflation that has eroded the purchasing powers of home buyers.
“Despite these challenges, Suraya remains committed to complete all the remaining projects and our promise to all our clients is that we are working to raise funds for (pending projects),” Mr Muraya said in a statement.
Perhaps to avoid a similar predicament, Cytonn Investments, which has started several off plan developments countrywide, recently announced that it was adopting a one project at-a-time strategy for its future investments.
“We are now concentrating on The Alma before embarking on The Ridge next year and after that we will take on the next project – Applewood Karen, an 18-villa development that sits on 10 acres,” CEO Edwin Dande said last month.