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Real Estate paradox of Integrity and Due Diligence

Blind investment in real estate is the major source of disappointments for most people staring out in this field

The East African region has had the best attraction as a real estate haven for investors keen on getting good return. It still remains a solid hub for investors as the demand for housing is high as per housing ministries reports of all member countries which continue to show a deficit of housing units for their growing economies. Further rise of the middle class has fueled these increased investments in real estate. Some of the other reasons that have ensured continued investment in real estate are:

  • High return on investment
  • Individual governments favorable policies and regulation
  • Access to financing for real estate investment
  • Infrastructure developments creating access to new areas
  • Increased diaspora remittances in favor of real estate investment (among others)

In essence the drive in real estate investment is being fueled from every angle by many objective and subjective reasons.

This aspect has been the hallmark of the belief in real estate investment. The only hurdle that has hit the real estate boom is the constant blunders being made by some of the players who fail to take into account that integrity is paramount in achievement of success. The worst decision that one can make in real estate investment is lack of a financial discipline and plan that need to be full proof not just making sense. It is reasonable to back up the sensible aspect of your investment with facts, objectivity and feasibility note that you can stand on in the future. The success of any real estate project is based on the basic financial plan considering the high levels of capitalization required. It is cash intensive as the budget requirement is precise and with no alternative.

With the argument above in respect of the level of integrity and financial discipline, a prospecting investor in real estate then needs to do enough homework to ensure that the structures in place are not just making sense but that it can stand the test of time.

Blind investment in real estate is the major source of disappointments for most people staring out in this field. It also fuels the unscrupulous developers who are keen to reap off unsuspecting clueless but innocent investors. This blind investment is unrealistic in this era of free information and increased openness of regulatory framework through institutions safeguarding investment.

The construction authorities, government ministries and professional bodies are at the frontline to ensure that there is credibility order and security in all levels of investment. This behaviour reminds me of the pyramid scheems era where people rush into an idea without due diligence and pure disregard to second thought. Any investment regardless of how low the capital risk should be taken through all aspects of review to ensure that it will work. The concept that you know and can make the better judgment will not protect your investment, there is need to put your judgment into review to get rid of biases that are individual inherent.

When I think of the debate on how there is lack of integrity in the real estate by developers I am left in shock because I find the investors equally responsible for their losses. This does not mean that I support the developers but my argument is if there was due diligence then the losses would not happen. These developers without integrity will lack means to thrive as they will be called out early by lack of business.

The idea that media is the absolute information delivery system should be done away with as its objective is to make money from paying customers. They are paid to deliver the information with the best possible influence index but they do not take a gun and force people to sign on the dotted line. That is an individual decision that should be made after careful consideration and due diligence.

Before you decide to commit on any real estate deal you need to follow through on some diligent steps to safeguard your investment. The euphoria of this is where the money and media hype is not the appropriate way to make investment decisions.

When you put integrity and due diligence on the same platform in this argument then you can see why I have to point out the obvious. The first responsibility of safeguarding your investment is with yourself through due diligence. If you are willing to make investment in anything then it should be easy to spend 1%- 5% of that investment for due diligence. I believe information is the key to a good investment vehicle and that’s why I would be willing to pay for it.

Due diligence is the key to driving out outfits that do not hold integrity to heart. Apart from due diligence a better monitoring and evaluation program by the relevant authorities and scrutiny by the media real estate through relevant documentaries would go a long way to kill this vice.

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