Hundreds of homeowners in Kenya’s flagship affordable housing project could lose their investments after a major bank moved to seize control of the development.
Kenya Commercial Bank (KCB) is seeking to auction off 100 apartment units and repossess 281 other properties sold to individual buyers in Erdemann Property Limited’s Great Wall Gardens project.
In a court application, the developer Erdemann Property is fighting to stop the bank’s actions, arguing they would “irreparably cause harm to the innocent third parties” who purchased the units in good faith. The case highlights the precarious position of ordinary Kenyans who invested in the ambitious affordable housing scheme, now caught in a dispute between the developer and the lender.
Erdemann Property launched the Great Wall Gardens 1 project in Athi River in 2015, aiming to build over 2,000 units to meet the growing demand for affordable housing in Kenya. Through a KES 1.3 billion loan facility from KCB, the developer constructed the initial 600 units in the second phase of the development.
In 2019 during the launch of Great Wall Gardens (GWG) phase 3 project, Erdemann Property’s managing director Zeyun Yang said the project had already delivered over 4,000 homes, with the majority built in Mlolongo and Athi River towns. However, Yang noted that the developer has faced various challenges, including “the lack or shortage of infrastructure and necessary services for the housing sector i.e. access roads, shortage of water and lack of essential infrastructure like sewer lines.”
Yang then revealed that the company has encountered bureaucratic hurdles at the Ministry of Lands during the registration process for the Great Wall Gardens 1 project. “I take this opportunity to inform GWG1 home owners that registration process of the sub-leases is ongoing despite the delay caused by the digitalization at the Ministry of Lands and introduction of PRNs at KRA,” he said.
Yang stated that out of the 596 sub-leases forwarded to the Ministry of Lands, only 50 had been registered so far, with 106 already booked and the remaining 440 expected to be ready in the next few months. He appealed to the national government to provide more incentives for participants in the “Big 4 agenda,” the government’s ambitious plan to address affordable housing, manufacturing, universal healthcare, and food security.
Yang also urged county governments to support private developers like Erdemann Property to maximize development. “We need to have a business community that also contributes towards infrastructure development such as roads, water, and sewerage systems in their neighborhoods,” he said.
According to the court documents seen by Sharp Daily, Erdemann Property was meeting its loan repayment obligations to KCB until the COVID-19 pandemic “heavily disrupted” the economy and “drastically slowed down” the uptake of apartment units. The developer says it informed the bank about the situation and even offered alternative security, but KCB rejected these proposals and instead began issuing threats and ultimatums.
“The Appellant has now been incapacitated economically by the Respondent. It cannot access credit from other financial institutions to run its projects or even settle the outstanding debt with the Respondent because of the negative listing by the Credit Reference Bureau,” the court application states.
In December 2023, the High Court dismissed Erdemann Property’s initial application to block the bank from auctioning the properties, ruling that the developer lacked standing to sue on behalf of the individual homeowners. But the developer is now appealing that decision, arguing that the judge “gravely erred in law and fact by strictly adhering to procedural law over substantive justice, and totally ignoring the public interest, and especially the interest of over the 381 innocent investors.”
Erdemann Property warned that unless the court grants its requested orders, “the Plaintiff risks being financially crippled and driven out of business and hence sinking with many investor’s money, and also many innocent purchasers for value risk being evicted and losing their hard earned investments.”
Former Machakos County Governor Alfred Mutua, whose administration worked closely with Erdemann Property, had lauded the developer’s commitment to providing decent and affordable housing. Mutua had said his government will work to set minimum construction standards and upgrade infrastructure to support such projects.
