Simple Homes Kenya, famous for the “rent as you own” model of home ownership, went missing on Monday February 27, 2017 and in the process conning Kenyans an estimated Sh500 million.
But even as huge as that number sounds, Kenyans were warned, but it seems they didn’t pay attention.
Business Editor at the Nation Media Group, Wallace Kantai, clearly explained why people should stay away from such investment plan that lured them into a well-executed con game.
Buyers were required to place a 25% deposit of the house value which was about KSh 250,000 and then pay the balance in equal installments for five to 40 years interest free. The houses were located in an upmarket neighborhood that had houses going for close to Ksh 40 million.
“Let’s take a minute to digest and analyze that,” said Kantai.
“If you paid cash for that house and rented it out, you would make your money back in three hundred and thirty three months. That’s almost twenty eight years. House prices are like stocks – you can use a basic price/ rent, which is analogous to a price/ earnings (or PE) ratio to determine whether a house is under- or over-priced. Long-term average is around 16. This particular house is at 27.7.”
The company marketed itself as a Special Purpose Vehicle (SPV) and allegedly owned by a former magistrate, a Meru businessman and a Nairobi MP. A former Miss Tourism Murang’a county Lilian Wangui Rukwaro is also being blamed for conning Kenyans their hard-earned money despite not being listed among the directors.
Rukwaro is a model who was heavily used to advertise the firm. The police are currently investigating the issue though the company’s offices are currently closed. Their website and Facebook page are no longer active.
The firm used fake pictures of projects in South Africa to swindle millions from unsuspecting customers. The company was registered not as a Sacco at the Registrar of Companies, but as a Development Consortium.
“The location they gave us first was wrong. They told us the houses are being constructed on Beijing Road in Mlolongo. I went there with my friends and there was nothing,” a victim recalled.
According Kantai’s prediction, that was only the beginning and more might be on the way. He made a bold prediction in an article on his social media platform in July 2016 that the real estate bubble will eventually burst because the prices are stretched from their true value and only fear, hope and greed are keeping things intact.
“Take your pick of trite metaphor, but don’t say you weren’t warned,” he said.
“Kenya’s property market is in a bubble. The bubble is still inflating, and if it doesn’t get deflated gently, it will burst very painfully.
“Real estate prices are almost totally un-moored from their true values, and what’s keeping them up there is hope, greed and fear (and a generous helping of dishonest money).
“Everyone’s a property speculator and dealer. All power to them, but when the music stops, there’ll be plenty of people left without chairs. When the tide goes out, you’ll realize how many people were swimming commando.”