Pirates behind Kenyan boom?

A government investigation has been launched into soaring property prices in Kenya amid claims that Somali pirates are behind the unusual real estate boom which has seen prices increase three fold in the last few years…

It is claimed that millions of dollars in ransom money paid to Somali pirates are being invested in Kenya, Somalia's southern neighbour and East Africa's largest economy. It is thought that pirate money could be going into other African real estate markets as well including Dubai.

‘There is suspicion that some of the money that is being collected in piracy is being laundered by purchase of property in several countries, Kenya being one of them,' said government spokesman Alfred Mutua.

Kenya may be the most attractive spot for pirates to launder their money because it shares a 500 mile border with Somalia and has investment opportunities and a large Somali community of up to 200,000 people, Mutua added.

In a neighbourhood of Nairobi now called ‘Little Mogadishu' because of its Somali community, large business and apartment buildings have sprung up. A similar explosion of real estate development can be seen in higher income areas of the city.
Somali pirates have been paid more than $100 million in ransoms the last two years according to Roger Middleton, a piracy expert at the London-based think tank Chatham House.

Pirates in Somalia say they invest their ransom money outside their war-torn country in order to prepare for a life after piracy. ‘Pirates have money not only in Nairobi but also other places like Dubai, Djibouti and others. I have invested through my brother, who is representing me in Nairobi,' said one pirate who gave his name as Abdulle.

Kenya is a favourite with pirates as it does not have stringent laws against money laundering, though a bill to curb the practice is being debated in parliament.

But Somalis who have no connections with pirates and who invest in real estate legitimately are worried by the move. According to Hassan Guled, the chairman of the Somali business community in Nairobi, Somalis living in Kenya have acquired property by pulling resources together and borrowing from banks. ‘Somalis here also depend on money sent by a large Somali population in Europe and America who cannot invest in those economies because of religious beliefs,' Guled said.

Bellow Kerrow, a former member of parliament and a Kenyan national of Somali descent, said it is high demand, not money from piracy that is behind the rise in property values. But Pius Khaoya, a real estate agent, said factors outside the economy are influencing property prices. ‘The prices have gone through the roof and it does not tally with the performance of the country's economy,' he said.

Khaoya, who works for Crystal Real Estate, explained that under normal circumstances in Kenya it would take 10 years for property values to double, but that real estate prices have tripled in the last five years.

A real estate agent who spoke only on condition he wasn't identified so as not to draw the wrath of Somali customers said some Somali businessmen pay double what a property's worth to complete a sale quickly.

A four bedroom home in Karen, a popular Nairobi suburb, that would have sold for $200,000 five years ago, sells for $500,000 today.

Source: www.propertywire.com

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