NCBA Group Managing Director John Gachora. PHOTO | DIANA NGILA Commercial banks are struggling to auction multi-shilling billion properties seized from loan defaulters with potential buyers hesitating to pay above the minimum bid price set in law.
Sluggish economic activity has created a growing pool of distressed borrowers whose assets are being seized by newly aggressive lenders.
But the auctioneers are not selling as fast as they are repossessing them, leaving a glut of repossessed vehicles, land, houses and office equipment as cash-strapped buyers seek to buy the properties cheaply and at outsized discounts.
The preferred discounts have not been possible due to the Land Act 2012, which bars banks from auctioning seized assets at below 75 percent of the prevailing market value.
NCBA Group #ticker:NIC Managing Director John Gachora reckons that few takers have offers that match the reserved bid prices, prompting repeat advertisements for property auctions.
“The problem is that nobody is offering 75 percent so we keep advertising, but we are not selling. So someone is sitting on money, but can’t buy because the price is up,” said Mr Gachora.
“Today, those who have money are sitting on it and those with assets are sitting with them. We are looking at each other. Only lawyers and auctioneers are making the money. We must find ways to make the two parties to think,” he added.
Non-performing loans in the banking industry rose to Sh347 billion in October up from Sh210 billion in January 2017, reflecting a jump of a 65.2 percent.
The mounting defaults in the property market are a reflection of the struggles that bank loan holders are undergoing in an economy that has witnessed a string of job losses in recent months across nearly all sectors as corporates intensify austerity measures to protect their profits.
This has seen workers who took loans on the strength of their pay slips default with the slowdown in real estate hurting property developers who are finding it difficult to sell units that were built on mortgage loans.
Small businesses have also suffered from delayed payments for their services by both the national and county governments, forcing some to close shop as others default on their loans.Banks have stepped up debt recovery efforts to clean up their loan books, leading to a spike in property seizures by the aggressive lenders.Many banks do not disclose the exact number of properties they have seized from defaulters. But the sharp increase in the […]
