Property market feeling the pinch of anti-corruption war

 By John Otini

Tighter banking sector scrutiny and the ongoing war on corruption has slowed down activities in the real estate market as a cautious stance is being adopted, property market analysts say.

Increased due diligence in the banking sector and tax compliance checks, they say have forced developers, especially those with questionable sources of wealth, to pull back on project development.

“Because the property market involves huge movements of money, the banking sector and detectives are demanding a structured explanation including tax compliance which is a deterrent,” said Wachira Macharia, a project architect at Cyton Investments. 

Property investments are capital intensive, making them favourites for proceeds of crime and government detectives have linked them to major scandals.

“Those with money are keen not to open a can of worms, because the market is quiet and you don’t want to be seen as the only person with money when no one else is building,” said Macharia adding that the general public is also cautious on huge building projects. “You find that so many houses have been built but they are not finding buyers, the money launderers have instead chosen to wait and see because they feel exposed to the ‘kamata kamatas’ (string of arrests) going on,” he said.

Analysts say the Central Bank of Kenya-led demonetisation process should have seen increased orders in the property market but nothing much happened. A survey by Kenya Bankers Association (KBA) revealed that the Kenyan housing market remained subdued since the beginning of the year due to reduced demand for houses.

Truckers Association of Kenya (TAK) said most of the buildings they were delivering construction materials to included hotels but these have also slowed down.

Nowhere to hide

“Most of the projects stalled immediately as scrutiny on real estate projects commenced, most of these buildings that were coming up even in the most unexpected of places have stopped and there are no orders for deliveries anymore,” TAK Secretary general Kennedy Karisa said.

“You could see very big buildings in very remote places, it was case of just getting the money spent because there was nowhere to hide it,” he said. Most trucks are used to transport building materials. 

The truckers who deliver cement, sand, gravel and other materials no longer get good business owing to minimal orders at the moment. Market players say it is not just the lack of loans from banks that has depressed demand –since loans have slowed since 2016 – but reduced proceeds from corruption that was helping to power the market.