THE ROLE OF PROFESSIONAL ESTATE AGENCY IN CREATING EFFICIENCY AND TRANSPARENCY IN THE KENYAN REAL ESTATE MARKET. CASE STUDY: NAIROBI AREA

1.0 Introduction and Background of the Study
The term real estate is commonly used interchangeably with real property to refer to land and all things permanently attached to it. Property in itself consists of valuable rights held to the exclusion of others (Betts and Ely, 2008). The definition of real estate typically includes land, fixtures (attachments) to land, anything incidental or appurtenant to land that benefits the landowner and anything which is immoveable by law. Real estate is a tradable commodity with a specialized market due to its unique characteristics of geographical immobility, heterogeneity, fixity, indivisibility and indestructibility. In addition, investment in real estate requires a large capital outlay and is surrounded both by many legal factors and government regulations (Ventollo and Martha, 2001).
The decision to invest in real estate is fast becoming the preferred choice for most Kenyan investors who consider it one of the most stable forms of investment. In addition, the rapid increase in the prices of Kenyan real estate has made many investors venture into real estate as a source of income. In recent years, the Kenyan real estate market has seen a new breed of investors who are targeting capital growth/appreciation as the most important source of return for real estate investments through their sale.
The city of Nairobi has in recent years been flooded with developers bringing property into the market for sale, rather than for the purpose of obtaining a stream
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of income in the form of rent. As indicated by Hass Consult (2013), this is because property values in the country have increased 3.36 times since 2000. Areas which were previously zoned as low-density residential areas such as Upper hill, Kileleshwa and Kilimani are now being re-zoned to high-density residential and commercial areas to allow for the development of large housing and business complexes for sale.
Ventollo (2001) simply defines a market as a place where buying and selling takes place. Due to the unique characteristics of real estate, the market for real estate all over the world does not conform to the definition of an efficient market. An efficient goods market is one where the products have close substitutes, many buyers and sellers who have perfect knowledge of prices and goods exist, there is little government interference and the product is easily transferable. Going by this definition, the real estate market is considered highly inefficient. It is characterized by few buyers and sellers; the product has no close substitute, imperfect information, segmented markets and high transaction costs. In Kenya particularly, the market is closed to only a few buyers and sellers due to the high value transactions that take place. The government exercises tight control in the form of laws and numerous bureaucratic procedures governing these transactions which makes it very difficult and time-consuming to trade in real estate in Kenya.
As a result, trade in real estate requires professionals who possess an understanding of the processes to mediate between the concerned parties who include but are not limited to financiers, developers, sellers and purchasers. Estate agents then come in to provide a service; matching demand of real estate with
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supply. Kotler and Armstrong, (1989) define a product as anything that can be offered to a market for attention, purchase and use which will either satisfy a want or a need. It includes physical objects, services, persons, places, organizations and ideas. In general, an agent is a person who carries out a transaction on behalf of another. Stephens (1981) defines an estate agent as one acting as an intermediary in the sale or acquisition of land. Bevan (1991), states that estate agents subsist in the property market to link or initiate links between prospective vendors or landlords and prospective purchasers or tenants, so as to create a transaction at the most favorable prices and best terms possible among other services. They act as catalysts to the real estate market and carry out the exchange function in this market.
It is with this knowledge that the importance of estate agency not just as a commercial practice but also as a professional one comes to light with respect to the real estate market in Kenya. A professional estate agent is not only concerned with the buying and selling of property but is also qualified in skills which do not directly concern the ordinary consumer. As the real estate market in Kenya continues changing and developing to better accommodate the needs of consumers, the agent‟s role as an interpreter of the market, its state, its values and the way it is likely to move becomes very important to developers seeking to join the real estate market.
A well-functioning real property market transforms the potential energy in property and generates money for the economy by facilitating the exchange of rights in real property which is the ultimate incentive for economic development.

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