Key Housing Finance Solutions PLC, a company known for promoting collective homeownership, is facing a major legal challenge after 236 registered buyers filed a civil lawsuit against the firm.
The plaintiffs are seeking the judicial termination of their contracts and the recovery of 26.7 million birr in contributions. Furthermore, they are demanding an additional 26.7 million birr in damages, bringing the total financial claim to 53.4 million birr.
The hearing, which commenced Monday at the Lideta Division of the Federal High Court, has brought the company’s business model under intense scrutiny.
Key points of contention include the reliability of the company’s insurance protections, the management of member contributions, and its overall capacity to meet housing delivery commitments.
The core of the dispute centers on the plaintiffs’ allegation that the company operates a "pyramid scheme." They argue that the model relies on the inflow of contributions from new members to fulfill housing commitments made to earlier participants, rendering the entire scheme unsustainable should recruitment slow down.
Furthermore, the plaintiffs challenged contract provisions that allegedly allow the company to use allocated housing units as collateral, potentially exposing members to third-party financial risks.
Insurance coverage also emerged as a major point of contention. The buyers testified that Key Housing’s initial partnership with Bunna Insurance was a primary factor in their decision to join the scheme.
However, after the National Bank of Ethiopia declared that the performance-guarantee arrangement did not meet regulatory requirements, the buyers argued their contracts were left without valid protection.
While Key Housing has since secured a new insurance agreement with the Ethiopian Insurance Corporation, the plaintiffs contend that this coverage only addresses risks following the transfer of property and fails to protect members' contributions in the event of company insolvency or contract termination.
In defense, Key Housing Finance Solutions PLC, represented by lawyer Birhanu Kefyalew, rejected all allegations. Counsel argued that the company employs a "horizontal strategy" rather than a pyramid structure, explaining that the move into real estate development was a calculated effort to lower housing costs and improve supply.
Regarding financial security, the defense maintained that members' funds are held in blocked bank accounts and that current banking arrangements provide protection comparable to previous insurance mechanisms.
However, the company’s delivery capacity faced skepticism during the proceedings. When questioned about progress, it was noted that the company has delivered only about 600 homes over three years, despite a membership base of approximately 22,200.
The defense attributed project delays to geopolitical disruptions in the Middle East, though no detailed construction progress reports were provided to the court.
The court has yet to rule on the case. As of now, there has been no judicial determination that Key Housing operates a pyramid scheme, misused member contributions, or breached its contractual obligations.
