Capital Ethiopia Newspaper

Karakore Real Estate controversy continues

Though 17 home seekers who paid from as high as 2.6 million birr to 250 thousand birr to a real estate developing company filed their complaints a month ago to the city government, there is no official response yet. Almost six months after KaraKore Real Estate cleared more than 10 million birr leftover debt to NIB International Bank (NIB), the controversy still continues between clients, the real estate company and the city administration.
The real estate developer, KaraKore, had agreed to provide clients with residential houses within a maximum period of two years and title deeds within the first three months of the residential unit completion, but the real estate developer allegedly failed to live up to its promises. Clients are claiming that the developer has been unable to deliver even a single residential unit during its over six years’ operation. Controversy mounted among the real estate developers and their clients in late June 2011, one week after NIB declared its intention to auction nine Ground + 1 residential units under construction by KaraKore while clients were claiming unfulfilled delivery promises, even though they made payments following the schedule stipulated on the contract. 
“What is happening in relation to this real estate company is a complete failure on the part of the officials and as a result causing potential Ethiopian investors living abroad to refrain from investing in their country. The victims are telling others about their bad experience. This company is harming the country’s image, it has spoiled the feeling of some Ethiopians who aspire to come back to their home land,” said one of the victims of the real estate company on conditions of anonymity.  
It was not only the delay in the delivery which gave clients headaches but also what is happening in creditor and government circles: the announcement of Nib International Bank that it was auctioning nine Ground + 1 buildings that are under construction in the developer site located in the west of Addis Ababa in Kara Kore district of the Kolfe Keranio Sub City and the announcement of the new lease proclamation. The two are factors that are adding salt to their injury. As a result clients were counting sleepless nights in fear of losing their presumed belongings. The city administration has revoked some portion of the plot it has given the real estate developer and it is now preparing the land for constructing condominium houses as observed early last week when Capital paid a visit to the area.
“It has been more than four years since my cousin entered into a contractual agreement with the company to own a residential unit called Ghion. Though the agreement was to hand over the residential unit with in one and half years from the date the contract was signed on August 27, 2007, the company has only managed to lay the foundation of the house. Yet my cousin has paid 750,000 birr.
As you can see today, there is no work going on in the area. All the daily laborers have left the company. Only security personnel are around. They are complaining that their salary for November has not been paid. Though we have filed our concern to the City Land Administration and Building Permit Bureau a month earlier, we have not yet received any official response yet,” said Nebiyu Moges, legal representative of the house owner, Yemane Getahun who lives in Sweden.
The real estate company leased 300,000sqm of land from the Addis Ababa City Government Land Development Agency in September 2003. Out of the total area, 117,446sqm was allotted for green area and road. The rest went for constructing the residential units. Based on the 2003 guidelines for residential units development, article three, sub article one, the city administration land development agency allotted 50sqm free of charge for each household involved in the real estate development. Accordingly, the city administration allotted 89,790sqm of land to the developer for a total lease cost of approximately 23 million birr. Out of which, the company has already paid a little over 5 million birr, in their first installment.    
A letter signed by Kasahun Tadese, manager of Nib International Bank Main Branch on June 29, 2011 and sent to Kolfe Keranio Sub City Land Development and Administration Office in order to cancel the restriction imposed on the real estate developer from further collateral agreement with other creditors, reads the company has fully paid its loan amounting to just over 10 million birr.
“I don’t want to talk about what happened with the past management but I can assure you that things are in the right track from today onward. I have just cleared all the claim of the bank yesterday,” Abdul Aziz O. Bajammal, the man who claims 20 percent share possession in KaraKore Real Estate had told Capital back then when the controversy was heating in late June.
At the time, some clients had held discussions with the new general manager of the company in late June at the company’s office located at TK Building adjacent to Bole ring-road bridge. The clients urged the manager to change its management team, reconsider a sub-contracted company, and get title deeds for those who have completed the construction on their own. Both parties agreed to discuss further the issue  and find potential solutions to the problem a week later. However, according to the clients, the meeting did not take place.  
“My colleagues and I have talked to the new manager. Even though he tried to calm us and promised to complete the project in the shortest possible time, we still have concerns. The loan settlement made our stress manageable though we still have doubts about the promise he made. As observed in the past, different individuals came and promised to complete the construction, however, the fact remains that no single residential unit has been completed by them. The only time we can be sure of his word is the time we are handed over our belongings,” said Getachew Assefa, a father following the case for his daughter who lives in London.
Though there is no single house completed and delivered to the client by the real estate developer till now, the company has promised to do its best. The mismanagement in the company and the mistrust on the part of the newly joining investors who wish to collaborate with founders remains a bottleneck for the company, according to some observers who have close ties with the company owners.  In close to three dozen residential houses and apartments under construction in the past, Capital observed two ground plus one, one ground plus two and one villa houses which look completed. The people whom Capital talked to said that those houses are completed by the client themselves and not by the company.
“The company has 83 registered clients so far. Most of them are living abroad. About 20 percent of our clients are paying according to the schedule while 40 percent of them are using mortgage financing. The effort of the company to link customers with banks to secure mortgage loans was not able to bear fruit due to the lending cap imposed on banks in the past two years. The remaining 40 percent of our customers are behind schedule due to the global financial crisis,” argued Samuel Mulugeta, the marketing manager of the company early in July.
“We recognize that we had a problem. As a result of both internal and external challenges faced by our company, our customers suffered a lot. We apologize for that. We will make sure that our customers will not suffer again,” had said the marketing manager of the company back then. Capital’s attempt to reach him this time was not
fruitful. In a discussion that lasted for about two hours at KaraKore office at the site last Thursday, December 22, 2011 with Abdul Aziz O. Bajammal, the head of the subcontracted company, Yasam Construction, clients have blasted out their anger. They have demanded to be provided with title deeds, plot number, explanation about the reason behind construction halt, a well prepared work schedule of the company about the way forward, a renewed business license of the company, and to reconsider the company’s engagement with the subcontracted company.
Though the company has not fulfilled its promise, it calls up on clients to pay additional money for price escalation adjustment. Some of the clients are frustrated with the new demand saying the company has done nothing visible on the ground with the money they have paid earlier. They strongly protested against the idea saying there is no legal ground to do so.
“I am here to solve the KaraKore problem. I have invested close to 40 million birr in this company. I will invest in the future too in order to help solve the problem so far,” said Abdul Aziz, a man who was unable to provide any legal document about his role in the company and visibly seemed not fully informed about what is going on, last Thursday.