Delayed payouts land investors in problems

Between 2010 and 2012, Mr Francis Kahura applied and got a Sh234 million loan to build residential houses on the Nairobi-Nakuru road, hoping to make a killing from the growing demand for houses in areas near Nairobi.

The businessman built three blocks in Zambezi and another in Regen, all comprising 130 units, a lifetime investment.

But even before he could pay a sizeable fraction of the loan in 2015, he was informed that the houses, which were already occupied, would be affected by the construction of the Sh16 billion James Gichuru junction-Rironi road.

The properties were among the more than 4,000 the government targeted for compulsory acquisition to give room for the 26-kilometre project.

The road is being constructed by China Wu Yi company.

DEMOLITION

Between September and November 2017, the Kenya National Highways Authority marked the apartments for demolition, triggering an exodus of tenants.

This did not worry Mr Kahura for he expected compensation from the government in December when work on the road would begin.

With tenants leaving, he began having difficulties servicing the bank loan.

“My flats are empty and I have no money. The banks are writing demand letters. I contacted KeNHA and the National Land Commission in January 2018 with the demand letters and they promised to look into my problem,” Mr Kahura said in a November 5, 2018 sworn affidavit.

In February this year, KeNHA and NLC gave Mr Kahura the compensation offer, which he gladly accepted and took the documents to the bank to be given a three-month grace period.

This is the time allowed in the resettlement action plan for the loan repayment.

LOAN

Almost a year down the line, Mr Kahura and many others have not received a dime.

Though his buildings have not been torn down, the businessman earns nothing from them, thereby defaulting on his loan.

And the lenders have not stopped writing demand letters. On December 4, Mr Kahura got a warning from the banks. They threatened to auction his multimillion-shilling properties.

The businessman says unless he is compensated now, he may end up a pauper.

The road project, which is already underway, affects 4,400 people. They are to get close to Sh11 billion in compensation.

Some 2,653 properties are in the 8.995-kilometre project zone from Zambezi to Uthiru, dubbed sub-lot 3B.

They include residential homes, schools and churches.

PAYOUT

According to the government, the owners are entitled to Sh7.2 billion in compensation.

Sub-lot 3A, which runs from James Gichuru junction to Uthiru, has approximately 1,000 properties. The owners are supposed to get Sh2.2 billion.

Sub-lot 3C, which runs from Zambezi to Kamandura, has about 800 victims seeking Sh1.4 billion from the State.

Ms Jackline Njoki is another businessperson affected by the road project.

She now plays cat-and-mouse games with her tenants after they demanded their rent deposits. They left because some of the houses are to be brought down.

Ms Njoki, who owns 34 houses in Mountain View, says NLC and KeNHA surveyors marked 10 of her flats and a perimeter wall for demolition.

Other tenants in the nearby houses left as they couldn’t stand the effects of the ongoing construction.

BUSINESSES

The tenants have ganged up to demand their deposits. “It is not easy to raise the amount as I have been using almost all the earnings from the other flats to service a loan,” the landlady said.

Businesses are making losses as customers cannot gain access to them.

Mr Kimani Njuki, the director of Rokim Group Ltd in Kinoo, says he lost a Sh50 million grant from Usaid. The agency wanted him to make and supply 18,000 energy saving jikos.

“When we received a notice for demolition, Usaid cancelled the deal. Our company suffered huge losses,” Mr Njuki said.

“We have not taken any orders for a year due to the prevailing circumstances.”

He added that he would have moved and continued with his business had the government compensated him at the agreed time.

BLAME

The affected businesspeople have formed a committee and written to the NLC, KeNHA, National Treasury, World Bank, Senate and National Assembly.

They back their demands with documentary and photographic evidence.

Members of the group want the contractor to suspend work on the road project until they are compensated.

Contacted, NLC vice chairperson Abigail Mbagaya said she is aware of the “very unfortunate” delay, but laid all the blame on KeNHA “since the authority is supposed to provide the money”.

“The commission does not have money for compulsory acquisition. The acquiring agency, which in this case is KeNHA, should provide the funds. We have not received anything from the authority,” Ms Mbagaya told the Sunday Nation.

KeNHA Director-General Peter Mundinia admitted that a majority of the affected businesses have not been compensated.

“Out of the 26 kilometres, only businesses on a two-kilometre stretch have been compensated,” Mr Mundinia said.

VALUATION

Like NLC, he passed the buck to another government agency: the National Treasury.

Mr Mundinia said the ministry is slow to release the money and when it does, it is not always enough. He added that the payment plan is still on course.

“The National Treasury knows what we need. We might get enough during the supplementary budget for the areas the commission has carried out valuation,” he said.

The authority, he added, cannot do any work on land or building without having fully compensated the owners.

The affected traders have asked President Uhuru Kenyatta to intervene.

They say their properties are not of any economic value even though they have not been demolished.

“Delay in compensation can have terrible effects on a business. The market value of the property, for example, is determined at the date of the publication of the acquisition notice.

"Inflation also affects the value of a property. Those affected by the project may be left with negative costs even when they are compensated,” Mr Njuki, the vice chairman of the committee, said.