Thursday, May 23, 2024
Money TalksPaper promises, no keys

Paper promises, no keys

Ethiopian homebuyers caught in construction chaos

Emnet George had saved every hard-earned birr with the dream of finally owning her own home. After years of scrimping and saving, she handed over her life’s savings to the Habitat New Flower real estate company to purchase an affordable housing unit. The sales agent promised the small two-bedroom house would be ready within three short years, in plenty of time for Emnet and her young family to move in.

But three years turned into five, then ten, then fifteen. Excuse after excuse was given by the company as Emnet’s two-bedroom apartment house, covering 115 sq. m., remained an empty skeleton of concrete and rebar. Emnet’s dream of finally having a place to call home slowly turned into a nightmare of never-ending delays, broken promises, and dwindling hope.

Emnet then realized that if she truly wanted a home for her family, she would have to finish the construction herself. Armed with nothing but determination and a shoestring budget, she embarked on the risky venture of completing her dream home, one brutal day of backbreaking labor at a time.

But that was not easy.

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The real estate company gave her the option to either pay additional money if she wanted her house delivered, or they would refuse to give her the title deed and not allow her to finish the house herself. When she went to the authorities, officials said her file was nowhere to be found, complicating the situation. At that point, she took the case to court.

The company’s delays and the authorities’ reluctance only steeled Emnet’s resolve. She quietly persisted with the construction, pouring her heart and soul into every brick and every tile. With hard work and stubborn hope, her dream home slowly took shape. After five grueling years, the court ruling finally came down in Emnet’s favor. She was granted the title deed and ownership of the property. As Emnet stood in the now-finished house for the first time as its rightful owner, she felt the sweet taste of justice.

All the struggle, sweat, and tears had built this place—a hard-won victory that would shelter her for years to come. Standing tall in the entryway of her little two-bedroom home, Emnet proudly says, “This is mine.”

Emnet’s struggle with homeownership is, unfortunately, not unique. Many homebuyers in Ethiopia have faced significant hurdles in their pursuit of owning a home. The experience of many homebuyers in Ethiopia has been that their years-long pursuit of owning a home has turned into nothing but thin air. Delays, legal disputes, and others left individuals and families in a difficult position, unsure about their housing situation and financial future.

The story of Access Real Estate is a notorious example of unfulfilled real estate projects in Ethiopia, highlighting the underlying issues that plague the industry. Despite being led by the illustrious entrepreneur Ermias Amelga, Access failed to deliver on its promises, leading to devastating financial repercussions for investors and a tarnished reputation for the entire real estate sector.

There have been several studies conducted on the issue of real estate companies delaying projects in Ethiopia. These studies have shed light on the causes and consequences of project delays and provided recommendations for improving the delivery of real estate projects in the country.

One study conducted by the Ethiopian Construction Design and Supervision Works Corporation (ECDSWC) examined the causes of project delays in the construction industry, including the real estate sector. It found that delays in project delivery were primarily caused by factors such as poor project planning and management, inadequate financing, and issues with land acquisition and permit processing.

The study recommended that the government and private sector work together to address these issues, including improving project planning, increasing access to financing, and streamlining land acquisition and permit processing procedures.

Another study conducted by the Ethiopian Institute of Architecture, Building Construction, and City Development (EiABC) focused specifically on the issue of delays in real estate projects. It found that delays in real estate projects were caused by a range of factors, including poor project management, a lack of skilled labor, and issues with material procurement.

The research recommended that real estate companies invest in improving project management practices, increasing training and development for the workforce, and improving supply chain management processes.

The two studies suggest that delays in real estate projects in Ethiopia are caused by a range of issues, many of which are related to poor project planning and management.

Dawit Samuel, a seasoned lawyer representing frustrated homebuyers whose properties were delayed by private developers, sheds light on the real estate industry’s underlying issues. Poor planning and oversights during contract signing are only the tip of the iceberg, according to Dawit. The real problem lies in the industry’s sluggish implementation process, where authorities and courts take years to give verdicts on cases involving delays.

To make matters worse, the legal delays can take up to four years, emboldening real estate companies to take risks during the planning phase. Despite calls for a proclamation governing the real estate business, Dawit argues that the current legal framework governing the construction sector is sound. However, authorities’ failure to execute follow-up procedures on time is exacerbating the problem, according to him.

But that’s not all.

Dawit points to investment channeling as another thorn in the industry’s side. Real estate developers often funnel the money they collect from homebuyers into other ventures, hoping to expand their projects and make more profit from other income sources.

A marketing executive, who declined to be named, confirms that malpractice still goes on in the industry. The executive cites the presence of graduates along Bole Road, trying to peddle homes that have yet to be constructed, as evidence of this.

Even with a rule requiring real estate companies to sell housing units only when the construction progress reaches 70 percent, the executive says there is no one to validate whether this rule has been met, “creating a vicious cycle in the industry with a dismal track record of broken promises.”

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