Addis Fortune (Addis Ababa)
Eden Sahle
16 May 2011
Access Capital Services SC, which aspired to deliver housing units to buyers within a year of starting construction, announced that it would be unable to deliver for another seven months and will pay owners 15,000 Br in compensation.
In the event of it failing to deliver on time, Access Capital had undertaken to repay homebuyers the full amount of the units with a 15pc annual interest rate if they wished to walk away, or a monthly 5,000 Br if they still wanted the units.
The offered amount is compensation for only three months as the company claims it suffered a four-month delay due to force majeure, according to sources from the company.
The compensation applies to buyers who have paid 100pc of the price for their units being constructed by the real estate developer.
As stipulated in the contractual agreement, buyers who have not paid in full are not entitled to compensation as they still owe Access Capital money, claimed sources in the company.
Each of the two buildings that are being constructed on an 8,233sqm plot in front of CMC on Ayat Road in Meri Loke Area of Yeka District contains 160 flats that had all been sold.
Access Capital offered apartment studios for 365,000 Br, one-bedroom units for 495,000 Br, two-bedroom units for 649,000 Br, and three-bedroom units for 750,000 Br, including VAT.
Most of the industry operators compete based on the location and type of housing they plan to construct. A one-storey house resting on a 250sqm plot can cost up to two million Birr. On a 500sqm plot and a 1,000sqm plot, the same house can cost up to four million Birr and more than six million Birr, respectively.
The company, which started construction of the units in June 2010, based its price and guarantee of delivery on the technology it is using, a first for the country.
The five-storey buildings are constructed from steel while the walls are assembled from prefabricated magnesium oxide boards. In a bid to reduce costs and time, concrete and cement are used only in the foundation.
The price for a quintal of cement recently escalated to a record high of 500 Br.
Although the speed at which it is manufactured and strength is unchallenged by engineers who spoke to Fortune, they noted that the prefabricated components were not as cheap as advertised by Access Capital.
For the supply of the magnesium oxide and steel, Access Capital entered into agreements with Living Steel Construction Plc and Ybel Industrial Plc, respectively, two local sister companies.
The steel is being shipped from China and has not yet arrived in the country, according to the same source.
Access Capital Services and Access Real Estate, its subsidiary that was established three years ago, are two of the more than 400 real estate firms licensed by the Addis Abeba City Government. Out of these, 125 have leased plots totalling 2.7 million square metres from the city, since 2004, according to surveys conducted by Access Capital Services.
Access Capital is one of the major shareholders in Access Real Estate, which is constructing apartment buildings adjacent to Nyala Motors around Megenagna in which all the apartments have been sold.
Real estate companies were ordered by the city administration to cease construction for four months, pending its investigations into alleged illegal expansions and transactions of land among real estate companies.
Access Capital would not pay compensation for this period and similar delays in future, the company argued.
Further compounding the problem was a plot request by the Addis Abeba Chamber of Commerce and Sectoral Associations (AACCSA) for the construction of the Addis Africa International Exhibition Centre.
While the city administration considered the request, it instructed Yeka District in September 2010, to stop construction activities within a 20ht radius of the 110,126sqm plot in front of CMC that has been leased by the AACCSA for 90 years,
As a result, the construction work of Access Capital Services along with that of Gift Real Estate, Country Trading Plc, and Blue Nile Trading were put on hold.
Access Capital is claiming that this resulted in its construction project being delayed four months.
However, Access Capital resumed construction in December 2010, claiming that it had obtained verbal permission from the Mayor’s Office.
All 15 developers were granted written permission by the district to continue construction, on January 27, 2011, according to sources.
Officials at Yeka District declined to comment on the issue.
“I knew from the beginning it would not finish on time,” a homebuyer told Fortune on condition of anonymity. “It will also not finish in the next seven months, but I am willing to wait since both the price and location make the apartments a good deal.”
Almost all real estate developers commit to complete and deliver units within 24 months, although hardly any of them have managed to meet this deadline.
“Most of the foundation work which may take up time has been completed,” said the source. “We are confident that we will finish in the coming seven months.”
If Access Capital received the supplies it needed, it would meet the new deadline since assembling the boards requires little time, a contractor told Fortune on condition of anonymity.
Access Capital’s plot was originally leased to Tis Abay Plc on a 50-year term, in 2006. Tis Abay was formed by Star Business Group (SBG), another subsidiary of Access Capital.
In the mid 1990s, shareholders in SBG formed Meri Real Estate along with Mengistu Mekonnen with a capital of 2.4 million Br. Abebaw Desta and Menweyelet Atnafu own 2.4 million Br worth of the shares, while Mengistu has 20,000 Br worth.
Access Capital has since joined the company, buying 70pc of the shares for 7.2 million Br.
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