A New Dawn for Off-Plan Buyers? Navigating Investments with Enhanced Protection in Kenya (2025)
Investing in off-plan properties – purchasing a home before or during its construction – has long been a popular avenue for Kenyans seeking to get onto the property ladder or secure investments at potentially lower prices. However, this model has also been fraught with risks, including project delays, substandard construction, and, in worst-case scenarios, complete non-delivery by defaulting developers. A landmark High Court ruling in March 2025 has signaled a significant shift, offering greater protection and recourse for off-plan buyers.
The Landmark Ruling: A Win for Investors
In a widely publicized case, the High Court ruled decisively in favor of real estate investors who had purchased an apartment off-plan from a developer, VK Construction Limited. The developer was found to have breached the sale agreement by:
- Failing to complete the apartment within the agreed timelines.
- Not meeting the stipulated quality standards.
- Refusing to grant possession to the buyers when requested.
The court ordered a full refund of the purchase price (Kshs 18.86 million) paid by the plaintiffs, Nizarali Pradhan Sumar and Shehnaz Nizarali Sumar. Additionally, the developer was ordered to pay Kshs 489,490 for finishing expenses incurred by the buyers and further compensation of Kshs 150,000 per month for loss of income due to the delay and non-delivery.
This ruling is considered a crucial precedent. It reaffirms that buyers of off-plan properties are entitled to compensation if developers fail to deliver as per the contractual agreement. It underscores the legal protections available and highlights the importance of holding developers accountable, offering a glimmer of hope and potentially boosting confidence in the off-plan market.
Why Off-Plan Investments Carry Risk:
Off-plan purchases are attractive due to:
- Lower Prices: Developers often offer early-bird discounts.
- Flexible Payment Plans: Payments can often be staggered over the construction period.
- Potential for Capital Appreciation: The property value may increase by the time of completion.
However, the risks include:
- Developer Default or Bankruptcy: The developer may run out of funds or go out of business.
- Project Delays: Construction timelines are often exceeded.
- Substandard Quality: The final product may not match the promised specifications or quality.
- Changes in Market Conditions: The property value could decrease by completion.
Essential Tips for Safer Off-Plan Buying:
In light of both the risks and the new legal precedents, prospective off-plan buyers should exercise thorough due diligence. Online property portals and experts offer crucial advice :
- Research the Developer: Investigate their track record, past projects, financial stability, and reputation.
- Verify Legal Approvals: Ensure the project has all necessary approvals from relevant authorities (e.g., NEMA, county government).
- Scrutinize the Sale Agreement: Seek independent legal advice to understand all terms and conditions, completion dates, defect liability periods, and dispute resolution mechanisms.
- Understand the Payment Plan: Clarify the payment milestones and what happens if either party defaults.
- Secure an Escrow Account: If possible, arrange for payments to be held in an escrow account, released to the developer only upon meeting specific construction milestones.
- Visit the Site Regularly: Monitor construction progress if feasible.
- Document Everything: Keep records of all communications, payments, and agreements.
- Know Your Rights: Be aware of your legal recourse in case of breaches, as highlighted by the recent High Court ruling.
Conclusion:
The March 2025 High Court ruling is a positive development for consumer protection in Kenya’s off-plan property market. While it provides a stronger safety net, the onus remains on buyers to be vigilant, conduct comprehensive due diligence, and seek professional advice. By taking these precautions, investors can better navigate the off-plan landscape and mitigate the inherent risks, making more informed and secure investment decisions.
