National Bank says it will auction the Jevanjee affordable houses in Ngara, Nairobi if the Sh1.9 billion loan it lent the developer is not settled in full.
The bank told the Nairobi County Assembly Planning Committee that it would sell the houses because, in its loan agreement with the estate developer, Jabavu Village Limited (JVL), the title deed of the land on which the houses are being erected is listed among collateral.
This means the more than 1,500 people who have been waiting for the affordable units, some of whom have paid the full amount, will constantly be on alert until the developer settles the debt.
Appearing before the committee, National Bank Managing Director George Odhiambo said the bank approved Sh1.9 billion for construction works.
Mr Odhiambo said that the bank would seek to claim its money from the developer even if it means auctioning houses sitting on the land.
“In the worst case scenario, we will rely on legal advice and the property as charged with the bank, gives the bank account access to it,” Mr Odhiambo told the committee on November 14.
When the MD was pressed further on whether the lender would be using the same title for the auction of the property, the answer was “yes”.
He stated that the bank was reluctant to seek approval from Nairobi County since the title had been transferred to the joint venture under the name of Nairobi Bachelors Jevanjee Estate Limited, who were the owners of the property, with 80 per cent shares.
Accordingly, the bank stated that the documents submitted to them by the developer show that Nairobi County only had 20 per cent shares in the project while Jabavu held the majority share.
The evaluation of the 8.9 acres where the project sits became contentious when the county blamed the bank for relying on an outdated valuation, putting the price at Sh1.8 billion in 2019.
Nairobi County Assembly Majority Leader Peter Imwatok argued that the bank rushed to approve the loan without due diligence, hence undervaluing the property.
“Due diligence requires you to know that this title deed belongs who,” Mr Imwatok said.
Also, the bank was questioned whether it carried out Know Your Customer (KYC) scrutiny, which is a standard designed to protect financial institutions against fraud, corruption, money laundering and terrorist financing in the event that the said company is in question.
According to the Assembly, the KYC report should have informed the bank that the county owns the land.
During the proceedings, it emerged that the developer attached one of the documents in the quest for loans, an addendum to the principal joint venture agreement, which stated the items should be used as securities, and the title was not among them.
“The lease granted to SPV (Special Purpose Vehicle) may be used by the development partner as a security to secure funding and the development partner is allowed to charge the sub-leases in respect of the units allocated to it,” Clause 22.5.2A of the addendum reads.
In her observation, County Attorney Christine Ireri said that the addendum had not been properly registered with the register of documents when the loan was sought, hence raising more questions about how the loan was processed.
She also said that Jabavu had not only breached the original agreement with the county but had also used an unofficial addendum to apply for the loan.
“This is a gross breach of the agreement between the county and the development partner,” Ms Ireri said.
Also, the documents which were relied on by the bank contain signatures of the former officials who left the office in 2022, and some in 2023.
These include former County Secretary Pauline Kahiga, and former Acting County Attorney David Aseko who witnessed the sealing of the addendum in 2019.
In another shocker, Jabavu Limited Managing Director Abdulkadir Ahmed Hussein said that they had not held any meeting as the directors for the last four years yet their resolutions were used by the bank to issue the loan.
The bank said that it only received a resolution of Jabavu which was signed by Mr Abdulkadir and Ahmed Ali Abdi and the same people signed the resolution as directors of Jevanjee Estate.
Also, the Committee chaired by Alvin Palapala was informed by the county chief officer for urban planning Patrick Analo that the developer was carrying out other activities on the site, which were not part of the agreement.
“There is a cement plant that has been established on this site. Cement is being transported from this site to other destinations which are not part of this project,” Mr Analo said as the committee promised to visit the site before compiling its report.
Also, the county claimed that the developer had not furnished it with the approved architectural plan despite several requests.
