17 June 2017

Kenya: Reprieve as Government Lifts Suspension on Lease Renewal

This week's decision by the government to lift the suspension on renewal of leases came after a cry from real estate developers and banks for loss of business.

In December, the government put on hold renewal of leases after widespread claims of take- over of land whose leases were coming to an end.

Real estate developers could then not purchase new land where leases were involved, leading to losses.

Developers who were in the process of selling apartments where they have to seek subleases found themselves with projects they could not get income from due to the suspension.

Johnson Denge, the senior manager in charge of regional markets at the equity investment company Cytonn Investments Management, said the government imposed the suspension in December because of claims of cartels accessing land records and knowing which leases were about to expire and manipulating the same.

"Investors shied away from leases that were less than 40 years to expiry date. Multinationals also shied away," he said.

He said the most affected areas were Athi River and Ngara where investors have been eyeing for business opportunities.

Most leases, especially those under the 99-year category, have been coming to an end and cartels have been seeking to cash in on unsuspecting Kenyans.

"The leases with less than 10 years were hot with cartels. Those leases about to expire affected the transfer process to new clients. And buyers were not willing to buy the property," he said.


He said banks were also affected as they could not give mortgages to short leases or give loans to security that had leases expiring.

"The ripple effect was big. Though we cannot quantify how much was lost in investment opportunities since December, it is easy to say it ran into millions. The government's move is commendable," he said.

Early this year, the government formed an 11-member task force to determine whether due process was followed in the renewal of land leases since 2010. The team has held hearings across the country.

Lands Cabinet Secretary Jacob i also released guidelines on how future leases will be renewed. He said the guidelines are heavily borrowed from the preliminary work of the task force.


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