10 October 2018

Kenya: Firm Introduces Islamic Based Home Buying Plan

Developer Rama Homes Limited has broken ground for its Sh4 billion Gateway Park in Syokimau. A residential development, it features eight blocks of three-bedroom apartments, each six-floor high.

Rama Homes' entry is, however, backed with an Islamic financing model- the diminishing Musharakah.

"This is an Islamic financing concept where the developer and the homebuyer partner in getting the unit done, then the customer will slowly pay back the cost in six years," said Mr Adrash Hussein (inset), Rama Homes' sales manager.

In Musharakah, the price does not change and there is no interest charged, he added.

"Construction of Gateway Park phase one commences immediately and is expected to be complete in the next two years," he said. Each of phase one and phase two of the development will feature 256 units, respectfully.

The estate will feature a swimming pool, a football ground, a basketball court and a children playground. Other earmarked amenities include a fitness centre with gym, spa and sauna, a small shopping centre, a social hall for parties and meeting, and a lounge area.

"This is a concept used in Dubai to create residential communities within major cities. It is our first time to replicate this in Kenya," said Mr Adrash.

The apartments will be served by an elevator and a stand-by power generator, and parking space for two cars. A bore-hole on-site will come in to complement county government water supply.

The location is ideal for people working or doing business within the city. The project sits on a five-acre piece off Mombasa Road in Syokimau next to the Gateway Mall, and a short distance from the Jomo Kenyatta International Airport (JKIA).

Each of the three bedroom apartments is going at Sh7.9 million, and home buyers are expected to pay a Sh50,000 booking fee and raise 10 per cent deposit (Sh790,000) within one month.

By November 2020, the construction of the houses will be complete and they will be handed over to buyers who by then will have paid 50 per cent of the cost of the house.

"They will move in and continue paying Sh70,000 per month for the next four years," he said

This will give the buyers partial ownership. "They can rent the house or even resell it at their own value, as long as they pay us as per the agreement," Mr Adrash explains.

In case a homebuyer defaults on payment, the developer does not incur losses. "We refund their money. By the time they default, the value of the house will have appreciated," he explains. We are breaking ground at Sh7.9 million, but by the time the construction is on-going, the value of the units will have hit Sh8.5 million, he observed.

The developer has partnered with the Kenya Commercial Bank (KCB) for a mortgage facility. "For those who feel that six years is a short time to pay the Sh7.9 million, we refer them to KCB," he added.

Many affordable housing concepts have been launched in Kenya in recent years only for investors to lose their money. "The developers divert the money to other projects once clients pay 50 per cent of the value upfront. But with Rama Homes, investors' money is safe as we break it into monthly instalments, and clients can monitor the progress of the project and exit at any point if they so wish," Mr Adrash explained.

Fatuma Osman, a mother of two and her husband are some of the hundreds of Kenyans who have bought into Gateway Park. "I have bought into the idea because of the payment model. Both my husband and I are employed and we feel that it is reasonable," said Ms Osman stays in a three-bedroom house in South C for which she pays Sh65000 in rent every month.

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