- “The home-buying market love it and the demand is high because those who are offering it are few,” says Mutiso.
- It is also important to note that even when the home buyer has the privilege to access the property, they do not have full ownership of the property until they pay in full. “For instance, they cannot peg on it as collateral for a bank loan,” says Mutiso.
- He says that looking at SIC, the tenant purchase scheme is performing much better than the conventional mortgages.
For many years, tenant purchase schemes have been associated with government agencies such as HF Group, the National Social Security Fund (NSSF) and the National Housing Corporation (NHC).
The scheme is an alternative payment method for property acquisition whereby the home buyer makes a down payment and is able to access the facility before fully paying for it within an extended period of time.
Most developers in the market tend to shy away from the model as it ties down their cash flow. However, with the many housing developments coming up, and many new and unoccupied residential houses within Nairobi and its environs, tenant-purchase scheme may just be the right model to adopt. That the appetite for tenant-purchase schemes in Kenya’s real-estate market is huge is not in doubt.
In November last year, Safaricom Investment Co-operative (SIC), the investment arm of Safaricom Limited, took a risk and adopted tenant purchase scheme for its Blue Bells Apartments project in Syokimau. “We wanted to widen the scope of home ownership by making the payment process flexible, easier and to accommodate more prospective home buyers,” explains SIC Chairperson Mackrine Abukah.
The market response was impressive, he says. Within just three months, they hit over 25 per cent of their 2016 sales target.
By January 31, 2017, all the 160 units in Bluebells Apartments phase one were taken up. “We realised that there was a big market gap that had not been tapped into. The tenant purchase scheme came in handy to address the home-ownership needs of this market; the un-salaried business people,” Abukah adds.
The sale extended to phase two of the project, whose construction is still ongoing and expected to be completed this month.
Phase one of Bluebells Apartments features 60 two bedroom units and 100 three bedroom units.
“The two bedroom units took longer to gain occupancy. The market is in need of three bedroom units, what they view as a complete family house,” she adds. The slow uptake of the two bedroom units informed the design of phase two, which features all 140 three bedroom units.
Phase one, which had more units than phase two, incorporated the setting up of shared social amenities such as cabro-paved pavements and parking spaces, walled and electric fencing, boreholes to complement council water supply, waste water and sewer treatment system, standby generator, solar street lighting and a 24-hour security manned gate. All these pushed the cost of the investment to Sh850 million, while phase two cost Sh600 million.
Stanley Mutiso, the sales and marketing manager, notes that the houses are spacious and the units are also well-spaced to allow for maximum lighting. “The architects were generous enough to give a separate washing area and a balcony,” says Mutisi.
Each of the units is also served with 1,000 litre water storage tanks.
But one factor that has attracted home buyers is that all the houses are internet-ready. “Internet access has become a necessity. People want a home where they can comfortably work from and stay connected with the outside the world,” says Abukah.
The location too enhanced the uptake of the tenant purchase scheme as Bluebells Apartments is in an upcoming zone.
He points out that SIC acquired the land in Syokimau when they noted its viability for a housing development as many people were settling in the area. “We too wanted to be part of this development,” says Abukah.
Being a residential area, the environment is serene and very quiet. “With Mombasa Road becoming a dual carriage way, the location offers great convenience for setting up an urban home,” says Mutiso.
These factors aside, the SIC tenant purchase scheme offers great flexibility as the homebuyer is allowed five years to make monthly payments. The three bedroom units are going for Sh7.4million, attracting Sh740,000 deposit, which one is allowed to pay within 90 days. “This purchase concept has endeared the model to business people and the self-employed,” says Abukah.
A majority of business people, she explains, are excluded from accessing similar facilities in banks or financial institutions like mortgage financing. “The tenant purchase arrangement works well with their cash-flow to acquire assets,” she adds.
The remaining balance is cleared with monthly repayments of Sh140,000. Within the 90-day period, Abukah says that most of their clients have put even more to the deposit so that the monthly repayments are almost equivalent to their rent, yet they can live in the house or rent it out.
Though the scheme offers great convenience to the home buyer, most developers in the market may not favour as it will keep their cash flow tied for many years. “This denies developers the instant access to the full amount,” Abukah adds.
It is also important to note that even when the home buyer has the privilege to access the property, they do not have full ownership of the property until they pay in full. “For instance, they cannot peg on it as collateral for a bank loan,” says Mutiso. He says that looking at SIC, the tenant purchase scheme is performing much better than the conventional mortgages.
“The home-buying market love it and the demand is high because those who are offering it are few,” says Mutiso.
Besides Fusion Capital and SIC; NHC, NSSF and HF Group are operating the schemes. However, their models tend to favour salaried individuals; mainly civil servants. “There is need for tenant-purchase models that are open to all Kenyans,” Mutiso adds.