Condo Game Robbing from the poor, giving to the rich

Condo Game Robbing from the poor, giving to the rich
By Tesfaye Getnet

Condo Game

(capitalethiopia) — Like the scavengers that come in flocks when an animal’s dead body lies on the ground, brokers with mobile phones and persuasive tongues rush to condo sites when the new homes are transferred to the lucky winners. They have many people in their contact lists offering huge money to condo owners to sell or rent them.
Condos that 12 years ago, went for 70,000 birr now sell for 600,000 to two million birr. Brokers who don’t have a license and don’t pay taxes can earn between 16,000 and 80,000 birr in commission each time they help sell or rent a house.
In sites like Balderas, Lideta, Chelot, Piassa, Arat Killo, Jemmo, a one bedroom rental costs around 5,000 birr and two bed rooms as much as 7,000 birr. This is more than the median monthly income in Addis Ababa. Sites in Summit, Lege Tafo, Birchiko ,Tulu Dimtu, Bole Arabssa on the outskirts of are seeing their rental prices climb as well.
Some people who now live in condo houses intended for lower income people have modern cars, spend over 20,000 birr a month for school fees, or have big business shops.
Elisabeth Amde, who lives in Addis, thinks buying a condo and reselling it at a higher price or renting it to another person is an easy way to collect money in a short period of time. She mentioned an elderly lady around 75 who walked with the support of a cane who bought a condo from a friend and after holding it for a short period of time, resold it at a higher price.
“When this old lady bought a studio house in Yaka Abadu from my friend last year, it was her 6th condo She bought the studio with 350,000 birr and told my friend she plans to resell it at a large profit, ’’ Elisabeth said.
In recent times the government of Ethiopia put an average of 1.6 billion birr in subsidies every year in addition to providing free land to get people with lower incomes into housing.
The condo market
Though no statistical data has been obtained from the government bureau many thousands of condos were sold in the past 12 years in legal and illegal ways. People in a diverse array of circumstances ar participating in this including people who have land in other parts of the country and Diaspora who live overseas. Just renting the condo can bring in 20 – 80 thousand birr a year.
According to Kassa Abraham a government worker around Semen Hotel the price of condo houses now makes them inaccessible to the people they were designed to help.
“Look if someone wants a 20/ 80 condo they must pay around 80,000 birr for the down payment which is 20 percent of the house’s total value and after that they need to save at least 2,500 birr per month in the Commercial Bank of Ethiopia until they cover the payment. This is difficult for people so their only option is to rent out the condo to other people.”
‘’The other problem is our poverty. Many people prefer to sell the condo to people who can easily pay it and with the money the poor can create a small business which helps them make a continuous income. Some people prefer to live in mud houses in the countryside and get extra income by renting their condo to someone else. In the past condos were for living in now they have become a means of earning an income,” Kassa added.
Selshi Atnafu, the Addis Ababa Housing and Development Agency Budget and Research Department head says condo buying and selling is not a bad act in the eyes of government.
‘’People can sell their property as long as they follow the right procedures. If a condo is five years old and the owner has the title deed, they can sell it. As a government we must normalize the price by building more houses. ’’
In many discussions with the city administration, condo dwellers said that their sites have less infrastructure and suffer from high water and power interruption and have to a shortage of transportation.
In the outskirts, far from the city center, many sell or rent their condo in order to rent another place closer to the city.
A lucrative business
Though it is not supported by research some brokers say that the value of condos on the outskirts of Addis Ababa are a minimum of 500,000 birr and in the center value of condo in the outskirt of Addis Ababa a minimum of 50,000 birr and in the center more than 1,500,000 birr and that the value goes up an average of 150,000 birr per year.
Brokers working in the condo business say some business people have up to 10 condo houses allowing them to earn around 60,000 birr per month and a few even own entire blocks.
Abera a broker in Asko said condo buying, selling, and renting has been the best business in the city over the past five years.
“When condo housing began, fewer people wanted to live in them, but the dynamic growing [population, and the high price of land caused the business to boom. We live in the country that follows Capitalism and it is not a crime to buy and sell condos to earn money.
According to Abera even the people who have large shops and buildings in the city buy and sell condos to earn extra money.
“It is simple mathematics, if one buys one condo at 700,000 birr today they can sell it with more than 850,000 the next year, so with a minimum effort the person can have 150,000 birr and if they are brave they can buy another condo and resell that later too.’’
The brokers’ game
The condominium houses proclamation that was ratified in 2005 and clearly prohibits the selling of condos for the next five years after the condo lottery winner receives the house. This was supposed to stop brokers. However, brokers made a way to get around the law. Say someone wants to sell their condo at 500,000 birr. They will sign a pseudo loan agreement. It will say they borrowed 1.5 million birr from the buyer. They then verify this at the Document Authentication and Registration Office.
To make this illegal transaction more trustworthy both parties make an unofficial agreement or ‘gentleman’s bargain’ which allows the buyer to hold the house as collateral.
Broker Alemayhu says the pseudo loan agreement is the best way to sell the condos even if it is based on the good faith of both parties.
“If you see the 500,000 selling cost of the house and the 1.5 pseudo loan agreement, there is a wide gap and it is intentional. Because, if the sellers breach the agreement, the pseudo loan they made is three times more house than the house price, which let the buyer to live freely. But the agreement is not a guaranteed one until the buyers get the ownership title from the seller.’’
Meles Kasse head of District three, Document Authentication and Registration Office says the pseudo loan agreement has caused many fights between buyers and sellers.
“Any agreement should be based on law, people come in to our office to deal with loan agreement and we do not have any evidence if the borrowers lent the money to get a house, or not. What we know is the borrowers signed to verify they have borrowed money from the lenders. The problem both parties rely on a verbal agreement on the house transaction but the law clearly stipulates that house selling and buying should be carried out in the Document Authentication and Registration Office and if both parties deny each other they will get into a to complex situation when they appear in court.
High and High
So far the government has constructed less than 140,000 houses but over one million people need them. With migration the demand will increase so rents will go up. Even the small three by three rooms in the city which were 300 birr a few years ago have gone up to 1,100 birr.
Recently the Ministry Urban Development and Housing told the parliament that house construction should encompass the private sectors to address the situation. Providing land, finding additional finance were the suggestions.
Currently 130,000 20/80 condo houses are under construction this began three years ago and it will take a minimum of two years take a minimum of two years before they are delivered. Some problems include corruption in construction, poor auditing and supervision, and inefficient contractors. Recently the Federal Audit Bureau ordered an audit to discover problems.
Tamrat Engeda, a construction government office worker says that foreign investors should be asked to come build houses.
“People want to marry, youngsters need to be independent and with the current performance it will take 50 years to get the houses to the people who are registered for them. If we look at the average performance since the condo house program began it is around 11,000 per year. We must invite Turkish or Chinese companies to construct 100,000 houses per year. They can share some experiences to local contractors otherwise all the small condos that we build for the poor will be in the hands of rich!