Kenyatta's Hotel Among Properties Worth Billions Stuck at Auctioneers

  • An executive room at the Great Rift Valley Lodge in Naivasha.
    An executive room at the Great Rift Valley Lodge in Naivasha.
  • Kenya's real estate industry is tittering on the very edge, following industry reports and data provided by the Central Bank of Kenya.

    Over the past few years, countless properties whose worth runs in the billions have been put up for auction after various forms of loan defaults.

    Some of the properties put up for auction that stand out in the recent past include a three-bedroom villa at the prestigious Great Rift Valley Lodge owned by the Kenyatta family and a section of Nextgen Mall along Mombasa Road.

    An aerial view of NextGen Mall along Mombasa Road.
    An aerial view of NextGen Mall along Mombasa Road.

    A penthouse worth Ksh48 million at The Mirage in Westlands was also put up for auction over the last few months.

    However, auctioneers are now decrying the current state of the market, disclosing that they were stuck with countless properties that had received zero offers for years.

    Garam Investments Managing Director Joseph Gikonyo, whose firm is auctioning properties worth billions of shillings, revealed to The Standard that out of 10, only one property was finding a buyer.

    A stark drop from previous years, “the overall economy is doing badly. The county governments are not paying suppliers, and this has to have an impact.

    “Selling will take longer. We have to keep trying. Out of 10, we’re only managing to sell one whereas in the past we used to sell seven," he disclosed.

    Gikonyo identified a recent law that seeks to protect property owners, dictating that property sold at auctions should not be sold at under 75% of the market price, was a limiting factor for the auctions.

    The rapid increase in properties being put up for auction has been linked to non-performing loans or defaulters, with the November 2019 Central Bank of Kenya (CBK) report revealing that default on mortgages jumped 41% to Ksh38 billion.

    Central Bank of Kenya (CBK) building in Nairobi.
    Central Bank of Kenya (CBK) building in Nairobi.
    Simon Kiragu

    The high number of defaulters coupled with the crippled market has forced banks to rethink their loan repayment enforcement strategies.

    Some of these tactics include joint auctions with property owners, renegotiating loans (for example by increasing the repayment period and reducing the monthly remittances) as opposed to the aggressive approach they had taken in the past.

    Back during the real estate industry boom, mortgage defaulters were unceremoniously kicked out of their houses without a moment's notice.

    However, Knight Frank Kenya Managing Director Ben Woodhams, claimed that the property market would soon correct itself.

    “While the market looks like it has an oversupply at the moment, the amount of space coming into the market has actually reduced partly because of the liquidity issues caused by the interest rate caps that came in 2016. We’ve actually seen the slowdown in development and as a result, the oversupply situation is slowly correcting itself,” he stated.