The debate about the regulation of the real estate industry has slowly started gaining momentum in the recent times. This conversation has been fueled, majorly, by the increase of the unscrupulous companies operating in the industry. These companies have sold empty promises to their clients. As a result, Kenyans have lost their hard-earned money.
The other reason why the discussion is attracting a lot of interest, is the formation of a real estate stakeholders association, commonly referred to as RESA. The formation of this association came about due to the rising cases of fraud in the industry. This association, is estimated to have about 200 member companies. It was formed early this year to ‘self-regulate’ the industry.
The crop-up and objective of this association, has set tongues rolling, and diverse views have emerged. In the varying opinions raised by stakeholder and Kenyans at large, there are two central questions that begs for a critically analyzed response. One; why should the industry be regulated? And two; what exactly is ailing the industry?
Speaking during a recent RESA function in Nairobi, the chairperson, Kinyua Wairatu, strongly defended the move for its formation.
“The deceit by some companies in the industry has led to a tainted image of the sector. There is a very bad perception about people involved in real estate business. Unfortunately, genuinely functioning firms have been pulled into the sludge, notwithstanding their innocence. This wrong view must be reversed at all costs, and all the players in the sector called to order,” he explained
The regulation agenda taken-up by the association has generally received a warm reception from stakeholders in the industry. In any event, Isaac Kamau, who is a lawyer, argues that the association has every constitutional right to exist under article 36 of the constitution.
To achieve this noble goal of restoring the confidence, there has to be a tight collaboration between the clients, the genuine players, and the government.
“RESA was founded on the understanding that, apart from achieving the primary goal of ensuring Kenyans can own land and houses affordably; the real estate sector remains a strong pillar in the growth of Kenya’s economy as it has proven to be over time,” says Peter Gitau the association’s Chair of the Council of Elders and a Director at Olive.
Statistics in the Kenya National Bureau of Statistics (KNBS) Economic Survey brings out this fact undeniably. The data indicates that there has been a positive performance trajectory in the industry for the last five years. The compounded growth rate stands at 6% at this time.
In the last quarter of 2022, the total Gross Domestic Product (GDP) contribution of the real estate was at 10.5%. These figures have positioned real estate as the second largest contributor to Kenya’s GDP, only after the agricultural sector that contributed 14.8% in the same period.
One of the pillars through which the government wants to realize development in Kenya is the housing agenda. So serious is the government about this course, that when presenting the budgetary allocations for the financial year 2023/2024, a collective sum of slightly more than Ksh. 73 billion was directed to different programs that are directly or indirectly tied to activities in the real estate.
“This commitment is a sure bet that the future of the sector is guaranteed. However, it also indicates the need for ensuring that there is proper regulation, and RESA comes in handy and timely,” added Gitau
In terms of creating employment opportunities, real estate has performed exemplary well. The number of people employed directly in the sector was at 4,300 in 2022 out of the 94,500 jobs created by the different sectors in the private sector in the same period.
Aware that the sector also creates indirect opportunities for surveyors, engineers, media and other consultancy services, it means that any attempt to overlook the need to tighten its regulatory framework is committing economic perversity.
As part of the association’s monitoring agenda, the public has been advised to always ensure that the companies, through which they intend to acquire properties, are members of RESA. This simple process, together with other procedures of ensuring due diligence, will help to minimize cases of investors being swindled off their hard-earned money.
But is poor regulation the only thorn in the flesh of the industry?
The government has been urged to streamline areas that affect doing business in this industry. For instance, the digitization of land ministry has been a talk that is long overdue. “Although the Nairobi registry has digitized part of its records, a lot needs to be done. If complete, it will reduce the amount of time within which land transactions are conducted. It will also reduce causes of land-fraud,” urges Kamau
Another area that requires urgent attention of the government, is the backlog of land cases. Statistics indicate that over 70 percent of cases filed in courts across the country are on land use and ownership.
“Once matters are taken to court over land, restrictive and preservatory orders are issued thus freezing any economic growth that could arise from the use of such land. Whereas we appreciate that the court protects such land from being wasted or alienated in any way, the court takes years to render a determination and the need for this issue to be addressed,” Gitau indicates.
Additionally, Gitau says that he legislative bodies in the country; the national assembly, senate and county assemblies, should involve the stakeholders while formulating laws that affect the industry. This means that the collaboration will take care of the interest by the stakeholders as well as the consumers.