AFFORDABLE HOUSING - JEEVANJEE SAGA

The Jeevanjee Housing Project was initiated by the previous administration to transition the estate from single dwellings to high risers and accommodate the steady rise of population in the city. Recently, it made rounds in social media regarding a land ownership issue and its good we get into the context.

Background:

The Jeevanjee housing project in question is not the gardens in CBD but an estate in Ngara.

The project was envisioned to have 1,830 units divided as follows:

*1-bed - 180 units

*2-bed - 718 affordable units and 350 market units

*3-bed - 318 affordable units and 216 market units

There are 7 towers with affordable units and 4 towers with market units.

In June 2019 a SPV (Bachelors Jevanjee Estate Limited) was formed to develop the project with Nairobi County Government (NCG) as the beneficiary represented by Nairobi County Executive for Urban Planning

and Lands and Jabavu Village limited (JVL) . as the developer. JVL is a real estate investment company which is a subsidiary of Hass Petroleum Group.

Being a Joint Venture (JV) agreement, NCG gave the land and the developer was to provide the financing.

The actual project work began in January 2021 after a relocation of existing tenants and was expected to take 2 years and currently reported to be 50% complete with a new completion time at 2026 while occupation begins later next year. The developer in his defense of delayed timelines shifted focus to Covid-19 pandemic citing shipment problems from china and and fluctuation of material price.

The Controversy:

Apparently ,the developer in unclear circumstances later used the property as a collateral in securing financing from the National Bank of Kenya and has since utilized slightly over ksh 500 million with the latest disbursement on March 2024. National Bank of Kenya confirmed of the loan transaction started in December 2022 and was completed by May 2023.

In the same case; it is reported that at the time of loan application, JVL was fighting bankruptcy suit over ksh 611million debt owed to Credit Bank Limited. This case was challenged in court and high court judge lady Justice Freda Mugambi upheld application by JVL to set aside the statutory demand issued by Credit Bank in early December 2022

Additionally, the SPV’s shareholding structure of the land, initially was 99% in favour of the NCG, and now altered to 80% for JVL and 20% for NCG. NCG Departmental committee on urban planning raised the following challenged the move since the land should remained fully owned by the county and the developer cease to use it in its transactions and requested the bank to halt such transactions.

As seen in the title above (to the right) ,the land was transferred from the colonial registry and leased to the County Government in July 2018 for 99 years. The formal transfer was signed on July 2019 by officials including the Chief Officer for Lands, the County Secretary, and directors of the estate company.

More hidden details:

What is not being mentioned is that there was a private investor in the JV who conspired with a county executive official in matters loan application.

The project representation changed hands from the formal leadership of the county to NMS at the time which also formed part of the problems in delays.

Additionally, the developer also seeked more financing from external development institutions which begs the question where the loan amount was actually being utilized.

Some of the project teams on site were allocating themselves the best units regardless of being registered in the boma yangu platform of which is unfair to the public.

My Take:

Firstly, we may then need to see the JV agreement for clarity as the tone used about the developer owning 80% of the land is draconian.

I don`t think that its no longer public land because the developer has a loan charged on the title as collateral. It remains public property till the title is transferred to the ultimate owners upon sale. But the question now would be:

- What is the guarantee of offtake by NCG? Because if this does not happen the developer has a double win. That also means the original tenants can be easily sidelined and beneficiary becomes the private investors to rent/sell to select persons and not the general public.

The issue of 80% ownership is not on land but the developer’s share in regards to the project’s revenue, assets or housing units.

In JVs generally;

- Since the land originates from Nairobi County Government, it remains county property unless otherwise agreed.

- Ownership remains under the county but the developer may secure a leasehold interest or irrevocable rights to use the land which can be sufficient collateral for lenders.

- The lender would usually only secure a lien against the developer's leasehold interest, not against the county’s land itself. This system protects public property while supporting project financing.

- The JV agreement should outline clear actions in case of a developer’s loan default.

I also think with the current Act, the housing fund is designed to make housing accessible directly to individuals by providing affordable mortgages but not to provide upfront capital to private developers. That is why they pick a loan or use other means of financing.

References:

Background data - Nation Africa

Controversy - The Informer

Hidden Details - (CI)

Published by CPM Mwangi .

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