Housing Finance managing director, Frank Ireri. The housing financier
plans to inject Sh5 billion into the property construction subsidiary.
The lender plans to raise part of the money through a Sh20 billion
corporate bond. PHOTO | FILE
The
projects will be implemented in the next 12 months through the mortgage
lender’s building and construction subsidiary, Kenya Building Society
(KBS).
The investments include 1,300
apartments that will be constructed this year on part of 50 acres, which
the lender owns at Komarock, in Nairobi.
The
housing financier would inject Sh5 billion into the property
construction subsidiary. The lender plans to raise part of the money
through a Sh20 billion corporate bond.
Housing Finance revived KBS in 2012 and the society’s first project was construction of houses on a 50-acre land in Komarock.
“The
cost will be funded through a mix of equity and debt. Part of the Sh20
billion that is to be raised through a bond this year is to go into
financing KBS,” said Housing Finance managing director Frank Ireri.
A
total of Sh5 billion would be equity with the balance, Sh25 billion,
coming from loans and pre-sales, Mr Ireri said of the planned Sh30
billion projects.
The lender has
until the end of 2016 to raise and allocate Sh20 billion through a bond
that would offer an interest rate of about 13 per cent.
“Right now, we are doing our cash flow requirements for the various projects KBS is about to start,” he said.
JOINT HOUSING VENTURES
The lender is banking on its property development arm to tap into the lucrative housing market, which faces a huge deficit.
“The
housing need as we are informed is about 200,000 houses a year. The
effective demand from our own estimates is probably about 25,000 houses
and that is due to the affordability gap,” Mr Ireri said.
KBS
was instrumental in the construction of houses in Komarock and Buru
Buru estates, in Nairobi, in the 1980s and 1990s. The company, however,
collapsed before it was revived 13 years later in 2012.
Last
year, KBS completed constructing 162 units in Komarock Phase 5A, which
generated Sh200 million profit for the company. About 162 houses
retailed for a minimum of Sh6.8 million at the start of the construction
in 2012.
A second phase, Phase 5B,
comprising of 120 four-bedroom houses also in Komarock, is expected to
be completed this year. The houses were sold off-plan at between Sh9.25
million and Sh10.5 million.
The
building of 1,300 apartments would start this year, completing the
construction cycle on the lender’s 50-acre land in Nairobi’s populous
Eastlands area. The apartments target the middle class.
A
shopping mall is also being set up on the Komarock land. Mr Ireri said
the lender is eyeing joint housing ventures with landowners instead of
buying land for such projects.
In
2013, Housing Finance partnered with a landowner in Riruta, Nairobi, to
set up 328 low-cost units at a cost of Sh186 million.
The
lender also entered into another deal to construct 300 houses in
Kahawa, on Thika Road. These two projects are expected to be completed
this year.
“In joint ventures, we
always seek land owners that have parcels of land that are reasonably
priced. Our target is to have an end product in the region of Sh4
million to Sh7 million. That is as much as we would go,” Mr Ireri noted.
Currently, Housing Finance accounts for 25.5 per cent of the mortgage segment’s Sh138 billion loans.
The
lender estimates that rapid urbanisation coupled with a rising
population are expected to see the home loan market grow 13 times its
current size.
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