By Jackson Okoth.
Not all Saccos with deep pockets are keen to acquire parcels of land for its members or even construct expensive maisonettes and bungalows for sale.
“Although we possess the largest total assets size, we have not gone big on property because we do not want to down members’ cash for long periods. The turnaround for land banks is slow and this is why we are not investing in buying land parcels all over the country,” said Robert Shibutse, Chief Executive Officer- Mwalimu National.
He added that the reason why Mwalimu National is not keen to invest in land is that it is not realistic to hold land for speculative purposes. This is especially around Nairobi and its environs where land prices have already shot through the roof.
“What we do is purchase prime plots and quickly sub-divide and sell off to members. After this, all we can do is provide cash to those who want to put up property on this plots. Mwalimu National has acquired another 35-acres plot in Juja, Kiambu County and will not put up houses here but re-distribute the plots to members,” said Shibutse in an interview with Sacco Review.
Shibutse attributes the decision by Mwalimu National not to go big on land acquisition to the need to free all available cash flow for onward lending to members.
“We do not want to stifle cash flow as this will affect our lending. Safaricom and Stima Sacco have gone big on land and property selling, ahead of us for the reasons that I have given,” said Shibutse.
His comments are shared by Daniel Omotto, Chairman of Mwalimu Sacco-Kisumu/Nyando branch.
“The reason why we have not gone big on putting up maisonettes or bungalows for members is due to the fact that most real estate developers are exploitative, use substandard materials or charge exorbitantly for their services. We have decided to help members acquire plots and give then affordable loans so that they can put up the houses at their own pace,” said Omotto.
He added that most developers take long to complete projects even after obtaining a deposit payment from the co-operative. This causes financial hardship to a member, given that developing real estate is a long term project. Omotto said that acquiring land for members remains a safer bet.
“The Sacco model is community based such that one has to have guarantors before acquiring a loan from the Sacco. This helps the Sacco in terms of following up defaulted loans as there is additional security,” said Faith Waitherero Mwangi an Associate at the Research Department-Standard Investment Bank.
Ms Mwangi said that the real estate sector provides an additional revenue stream compared to just interest income from members loans.
“ We have been motivated by the need to provide some assets to our members when they retire and go into old age. This is why we have gone ahead and registered a subsidiary arm that will expose our members to the world of real estate and other investment options and classes,” said Mr. David Kariuki Njeru, CEO Winas Sacco.
Kariuki added that Winas Sacco is already carrying out education seminars among its members on the need to save and invest in projects rather than spend their cash on consumption
“Saccos are non-profit making organizations and thus are not after making a kill when selling pieces of land of residential property to their members. Saccos offer lower interest rates on credit given to members and have small margins after covering for any administrative or operational expenses,” said David Mategwa, National Chairman-Kenya Police Sacco Limited.
Also sailing in calm waters is Boresha Sacco- which has so far concentrated on buying plots for members.
“While Investment Co-operatives are making a fortune, players such as Boresha are still confined to buying pieces of land and then selling to members. We have not gone into buying and selling of houses due to lack of funds and other logistical reasons,” said Moses Chebor, Chief Executive Officer, Boresha Sacco Society Limited.
While he acknowledges that the Sacco model provides the best option for those seeking to acquire land or real estate property, Chebor fears that rapidly escalating land prices could soon put this essential commodity out of reach for many poor families.
“We have areas where land prices have increased from Sh 200,000 per acre to Sh 2 million in a span of just two years due to the activities of those who buy land merely for speculative purposes. At this rate, there are poor Kenyans who will not be able to acquire land anywhere,” said Chebor.
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