Corruption’s shame in Real Estate

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Addis Ababa has been undergoing a facelift as luxury apartments have mushroomed alongside, office buildings and villas. Its urban areas have also expanded to include the former rural areas surrounding it. Real estate development has dramatically changed the city, giving it a modern look and feel. However, the continuous housing demand and scarcity of land has created corrupt practices such as grabbing land for many years with unfinished or no construction.
The new administration of the Addis Ababa region has taken action recently to address the land grab and corrupt practices which to me plausible and long overdue. This action will set the standard. In a similar note, the council need to also consider and revise standards and operating procedures to issue construction permits, tender processes etc that is currently the bottleneck that hinders completion of projects that actually gave the city a nickname “the ever constructing city” where building construction never ends. One asks, how long it took to finish Midroc Ethiopia main office (where resources is not a problem), why are some real estate projects still not finished for over 10 years. Such questions should be on the burden of the city council to further look into.
It is a known truth within Real Estate Developers that many are guilty of malpractice and playing foul over the construction development life cycle is an ubiquitous phenomena for most if not least.
From the outset, tenders are hijacked. This is particularly a known practice for large scale construction. A group of contractors /bidders gang up and decide what to put as an offer in each bid and know who will be the winning bidder. This will do two things. One, as all are bidding anyways, it will allow them to act as if they are competing with the outside world but in essence it is an orchestrated action. Secondly, the winner bidder will have a jacked up price but is the lower than it’s setup counterparts. The winning contractor pays the rest some amount, which is known as RENT, (mostly added to the project bid proposal, inflated price) and everyone is happy except the project itself. By the way, this could also be used for any tender including purchase of raw materials, food items etc.
The other corruption method is delaying the project itself. Particularly of interest to me is housing as housing market prices keeps skyrocketing. Delay in completing a project is definitely costly and today, it is does not burden the developer but the public. The developer will take this chance to request more money from the poor public or ask to forfeit the house etc. The scandal with Access Real Estate still lives in the public knowledge. The city council needs to have a mitigation plan so that it never allows such schemes to happen again.
Another delay strategy which is ongoing and has dealt a major blow especially to the Diaspora community has been going on with the Country Club Developer known as CCD. There is a scam going on that each region of the country must solve. I know a very close friend of mine (Diaspora) suffering from continuous requests for additional money to complete a project for which an agreement was signed more than 10 years ago. As of this write up, the construction has not been completed but additional funding had been continuously asked for by CCD. Sadly, the negligence of the city audit has allowed the contractor to continue to build phase 9 and so forth while phase 2 properties are hanging within the construction compound held hostage for additional funding exceeding the original signed and agreed upon contract. Construction never commences once money is received as CCD knows that clients are remote. Only small amount of work immediately starts when client shows up at CCD office. It seems to me that CCD systemically wants these clients to sell back at the original agreed project price to CCD as today’s price exponentially inflated and CCD is in its 9th or 10th phases of construction. Confusing to the public is why a developer holds property plan by it’s name for properties that have been funded by 50% or more. Can the city council help alleviate this corrupt practices by retroactively following up case by case and refund funds to public possibly with penalty.
I was honestly taken off guard when I saw CCD’s owner, in Shashmene with the Prime Minister on a visit to an agro industrial area. Curious minds would ask how such a developer could be given as big a project as this while not diligently and most of all professionally completing previous commitments.
I believe the elected officials must address the real estate scandal with utmost priority. The development of a city plan does on end with issuing a tender or leasing a plot of land. The City must protect the public’s interest from start to finish. In most developed countries there are penalties attached to delayed projects. Major excuses are seen to lie around scarcity or escalation of raw material prices which sometimes is a valid reason but must be verified. No builder must hold the plan hostage for a delayed house and other projects where more than a certain amount of payment is made for the property. Last but not least, the City must include as criterion for issuing or renewing developers’ licenses based on merits that addresses professionalism, past construction excellence, not by how many trucks one owns. This of course enforces standards as it calls for downgrading or upgrading and revoking of construction licenses.

By Getahun Alemu