City Landlords Devise New Tactics to Fill Vacant Homes

Property developers struggling to meet their fiscal duties are turning to unorthodox tactics to fill their houses with tenants to avoid losing their buildings to aggressive lenders.

A study by CK has revealed that a section of landlords in Nairobi, Thika, and Kiambu are increasingly making huge concessions to attract new tenants while retaining existing ones – including lowering rental charges and agreeing to more flexible payment terms.

In Kinoo, Muthiga, and Regen, for example, some landlords are no longer asking for a deposit from incoming tenants, while the more distressed proprietors are now allowing payment of rent in instalments.

In many instances, landlords are agreeing to cut their rents by up to 20 per cent rather than have their tenants move out to seek cheaper shelter amid rising cases of layoffs and delayed payments to suppliers.

“True, things are really tough. We used to charge Sh90,000 per month in Kilimani, now we’re asking for Sh60,000,” Joram Kariuki, a property agent, told this writer on Wednesday.

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This is the case in most other estates where landlords, many of whom are in breach of loan covenants, are giving in to the tough demands of tenants rather than risking losing their properties to auctioneers.

“I live in Kasarani and trust me, guys are moving out every month without fail. The (new tenants) are given lower rates than what we pay. Besides, tenants are being allowed to pay twice a month,” Alexander Ngaira, a city dweller recently said on Twitter.

According to real estate agent Knight Frank, prime rents decreased at a faster rate in the second half of last year compared to a similar period in 2018 due to an oversupply that continues to tilt the market in favour of tenants.

“Landlords are increasingly having to make concessions to remain competitive, including giving longer rent-free periods, reduced rents and escalations,” the agent said in its Kenya market update for the second half of 2019.

The dwindling fortunes of the real estate sector are striking a huge blow to investors who took expensive loans to build rental houses in the hope that rents would keep on rising to meet all of their financial obligations.

Many landlords have been unable to service their loans a situation that has seen lenders stepping up debt recovery measures to clean up their loan books – leading to a spike in property auctions across the country.

Nevertheless, even as the number of seized properties continues to rise, auctioneers are finding it difficult to sell distressed buildings mainly because the sizes of loans in question are often higher than the values of the properties delivered for auction.

“Investor interest in distressed homes and properties is currently low given the current economic situation,” says George Mbagu, a transfer agent at Immediate Auctioneers.

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