House to let

The following are the possible effects of initiatives to contain coronavirus on property in Kenya:

There is a proposal from several corners that tenants hold back on rent for the period of the quarantine—three months. By law, this is not supported in any way and landlords are under no obligation to effect such a request. There is nobody called the Landlords Commission. If it is to be actualized, it will purely be on the basis of an act of mercy by an individual landlord—a development that would endear such a landlord massive public goodwill and public relations. The only way such a directive can be actualized is if Treasury comes up with a rent reimbursement scheme with a set of guidelines on implementation. So far, Treasury has not announced any such measures but the public anxiously awaits.

While other countries have waived the servicing of mortgages and payment of rent by their citizens through one government initiative or another, in Kenya the closest such directive is a communication from central banks that personal loan repayment be extended by a year to ease the burden of monthly repayments all through the coronavirus pandemic duration. Even as it stands, it is not clear whether this is just a proposal by the CBK or an agreed-upon decision to be implemented by all financial institutions. There is no mention in any way affecting mortgage payments meaning that as it stands, banks in Kenya will expect those with mortgage expectations to pay their mortgage loans on time whether or not there is a business slowdown or redundancies occasioned by the coronavirus pandemic and other economic factors.

The closure of lands and collateral registries as a result of the coronavirus pandemic will slow down transactions in the property sector due to lack of access to registration and documentation of property at the registry at the Ministry of Lands and Housing which houses all the records for reference.

Individuals intending to finance property by obtaining loan facilities from banks—mortgages and loans--will also be delayed as financial institutions will not be able to confirm their securities as they will not be able to access the records at the land ministry. This means that mortgage loan or any loan approval (where security in the form of property is required).

There is a high possibility of default of the lease and rent obligations in the event of a complete lockdown directive by the government for both commercial and residential and all other forms of rent. A lockdown would mean that tenants stay at home and do not access their business premises. If that happens, the question would be as to who pays for that period that the offices or business premises are not used because of a government directive. It is possible that some tenants will hold back payment of rent for the period that they are not able to access their offices or places of work. This, however, will be determined by what is written on the lease agreement. Some leases contain provisions advising the tenant not to pay rent in the event of say a government directive to lockdown operations.
The slowdown associated with coronavirus pandemic might slow down construction processes and delay delivery dates. This can happen when the workforce has been advised to stay at home, when transportation is curtailed and when supply hitches hit the arrival of construction materials to the site of construction.

In all fairness, the economy has been undergoing a slowdown. Any mindful landlord would not undertake a rent escalation around this time. Such an undertaking would be seen as selfish and inconsiderate out of touch with reality and is likely to lead to low occupancy rates--meaning low rental income and higher rent defaults. Most mindful landlords have either restrained from increasing rent or even reduced their rents to encourage occupancy. In some cases, landlords are giving a month or so of a rent holiday to encourage occupancy, particularly in the office space. This should be highly encouraged and the onus is on property managers to advise their clients appropriately.

*****The writer is an economist, a StratCom/Media Relations Consultant, a realtor and a public intellectual*****
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