The Kenya Union of Savings and Credit Cooperatives (Kuscco) targets to auction houses and parcels of land valued at about Sh1.7 billion in the hands of 684 individuals who have defaulted on loans issued through its housing fund.
Kuscco, the umbrella lobby of Saccos, has now initiated the second phase of auctions of land and houses located in different parts of the country, including Kitengela, Kiserian, Kajiado, Nyayo Estate, Kisumu, Thika, Machakos, Webuye, Bungoma, Kisaju, Lukenya and Syokimau.
The latest phase of auctions will be held on November 6, November 14 and November 28 based on location. This follows a similar exercise in February this year where Kuscco put on sale 80 properties.
Kuscco is seeking to recover defaulted mortgages that were issued under Kuscco Housing Fund (KHF)— a subsidiary of Kuscco which was issuing loans for buying houses or developing residential apartments.
Kuscco managing director Arnold Munene said the target is to recover at least 80 percent of the Sh1.7 billion. The sale through auction will be subject to a reserve price—usually set at not lower than 75 percent of the prevailing market prices of what is being auctioned.
“We have a non-performing portfolio of Sh1.7 billion under Kuscco Housing Fund. This is actually from members who defaulted under the then mortgage scheme,” said Mr Munene in a response to our queries.
Kuscco Acting Managing Director Arnold Munene speaks during the Inauguration of the body’s new Board of Directors on May 7, 2024, at NSSF Building in Nairobi.
Photo credit: Billy Ogada | Nation
“We are conducting the process in phases since each case must go through the legally required notices — a 90-day statutory demand notice from our lawyers, followed by a 40-day final notice and finally a 45-day notice from the auctioneer.”
Kuscco launched the multi-billion-shilling housing project in 2013, initially starting in Kitengela before expanding to different parts of the country, including Nyanza, Kisii, western and coastal regions.
The project, which was managed through KHF, involved building residential homes, commercial buildings and facilities for sale to customers.
However, the project was caught up in the years of alleged financial improprieties at Kuscco. A PricewaterhouseCoopers (PwC) forensic audit linked senior officials to the heist that sank the entity into a Sh12.5 billion insolvency.
Concerning the housing project, the PwC audit showed Kuscco did not follow the procedure in picking the contractors. It also unearthed diversion of payments and non-payment for the houses by those who took them up, even as the management failed to provide for loan losses.
“We observed that KHF did not make provisions for loan losses in the financial statements for the years between 2017 and 2021, and though they made this provision in 2022, this expense was understated by 84 percent,” said PwC in the audit made public in February this year.
PwC audit showed as at end of December 2023, KHF had a loan balance of Sh3.93 billion that had been issued out to 1,962 members.
Residential homes construction loans topped the list with Sh1.27 billion, followed by housing fund (Sh883 million), house purchase loans (Sh633.48 million) and Sh417.1 million to finance purchase of plots. The rest of the loans were for other uses, including commercial or rental units and house completion.
