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Islamic financing model offers affordable homes

For the past 10 years, Dr Abdullahi Sora Abagira has harboured a dream of owning a home. However, his search for the ideal living space has been encountering several setbacks, mainly revolving around pricing.

“The houses available in the market were quite expensive. Buying a house in cash was particularly not practical for me because of the high prices,” he says. The medical doctor had the option of taking a mortgage, but had reservations about it.

“Due to the high interest rates on mortgages, I would end up buying a home at double the original cost, which was not realistic,” he says. And he is not alone. Affordability is one of the most desirable qualities of a house to a prospective homeowner.

High interest rates on mortgages and rising construction costs have pushed home prices sky high, dashing the dreams of many Kenyans keen to own homes. Luckily for Abdullahi, he managed to buy a house from a real estate company that offered flexibility in payments that he was looking for early this year. Abdullahi bought a home in South C on off-plan basis, from Rama Homes.

Under this off plan model, developers sell a construction concept to prospective buyers before they begin to build. Buyers make an initial payment after which the construction begins. Getting involved from the very onset of construction, gives buyers room to personalise the design, fittings and finishes of the house.

On the other hand, the payments give the developer a pool of financial resources to help complete the construction. Abdirahman Hussein, Sales Manager at Rama Homes, says the company also offers a unique model for repayment. Buyers only make an initial payment of 10 per cent and settle the rest in instalments spread across a period of between six and eight years.

“The long payment plan is aimed at giving buyers room to save and eventually be in a position to own a home,” says Hussein. “Besides, there is no interest charged on the payment hence the buyers do not end up paying inflated prices at the end of the payment period,” add Hussein.

The decision to make the payments interest free is based on an Islamic financing model known as Murabaha, which Rama Homes applies. Under this concept, the business does not charge interest on property as it is considered Riba (exploitative). “Charging interest is unfair, which is prohibited in the Islamic religion,” he says.

Rama Homes, which was established in January this year, currently boasts of two developments, Euromax Heights Apartments in South C and Jumeirah Heights in Parklands, Nairobi. Plans are underway to roll out a third project, Deira Heights before the end of year. To be built in Parklands, Deira Heights will be a mixed used development with 78, four-bedroomed apartments.

A helipad is one of the outstanding features of the development. The attractive terms of payment of the real estate developer have roused interest from buyers keen on owning homes.

“Euromax Heights, which has 50 three-bedroomed apartment units, was the first project we rolled out this year. We sold all the units even before we broke ground,” says Charles Ngwili, Finance Manager, Rama Homes Ltd.

Likewise for the development in Parklands, the demand has been high, with buyer interest in good quality housing on a flexible payment plan showing no sign of abating. Jumeira Heights, three and four bedroomed apartments units are selling at between Sh12. 5 million to Sh17.5 million depending on the size.

The increase in demand for the units has been partly driven by the fact that they are a good investment option for buyers. “On off-plan basis, the price of the house shoots up immediately we break ground.

A buyer can therefore buy from us on off plan and sell later. sell the house at a profit,” says Ngwili. Though relatively new in the real estate field, Rama Homes operates under a group of companies that have been in businesses in Kenya for over 10 years.

The businesses in automotive and energy fields have been pivotal in helping Rama Homes gain the trust of clients in real estate. To further ensure credibility in the market, the developer follows strict legal procedures at the time of sealing a deal with a client so that both parties are cushioned from fraudulent deals.

Interestingly, unlike in banks where a client who defaults payment end up losing everything, Rama Homes gives a provision for defaulters to return the house and get a refund of their money. With this unique model, the developer is paving way to a convenient and affordable way of owning a home, a pursuit that has been difficult to achieve for many middle income Kenyans. Quick Facts

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