Banks will be among the biggest losers in the ongoing demolitions
According to experts, the lender's exposure arises from either financing the developments and mortgages for affected properties or having taken them as security for huge loans.
In the case of Taj Mall now renamed AirGate Centre, which has been threatened with demolition, the owner, Ramesh Gorasia says he borrowed Sh500 million seven years ago to put up the business.
The loan, he said, is still outstanding.
Yesterday, Mr Gorasia received an unsigned notice to demolish the building or have it pulled down by the Government at his own cost.
Should the shopping mall come down, it would complicate matters for Gorasia and his lenders who insist they would not comment until they receive an official communication.
“We do not have a position on that till we are formally informed, we haven’t been informed by Taj Mall,” said the lender in an earlier interview.
Kenya Bankers Association said there was growing concern among its members but could not immediately give an indication of the level of exposure.
“If the construction had been used as security then that leaves the banks with a concern because they will have to get alternate collateral. Right now we cannot tell the extent of the industry exposure.”” said KBA's chief executive Habil Olaka said.
It is not clear, however, how an alternative collateral could be sought, especially among borrowers who are servicing their mortgages for the only property they own.
Mr Olaka granted the interview last week as the demolition exercise gathered pace.
Olaka defended banks for extending credit to owners of properties set for demolition, saying the investors could have presented genuine ownership documents.
“On the issue of the title, I do not think the banks were careless, you will find that the title that secured the loan is clean, but then the actual construction strays into riparian land. At the point of construction is where you get a wall or parking lot extended,” he said.
Former Bobasi legislator Stephen Manoti, who owned the now demolished South End Mall, said he was too distraught to speak on whether his bankers had been affected.
“I do not want to talk about it. It does not help anyone,” he said.
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