NHC to diversify into commercial properties

Money Markets

 

A National Housing Corporation project in Nairobi West. PHOTO | FILE 

By JOHN GACHIRI, jgachiri@ke.nationmedia.com

In Summary

• NHC says it will put up commercial properties next to its projects as a response to growing demand for houses that are serviced by gyms, cafes, banks and other facilities typically located in office blocks and retail malls.
• NHC has traditionally constructed and sold houses and used proceeds to build more units.
• Property consultants say there is still demand for shopping malls and offices since developers have concentrated on residential houses.
• The housing agency is looking at new ways to raise funds it needs for the construction of 30,000 housing units over the next three years. Of the 30,000 units that are coming up 5,000 have been set aside for the low income segment.

The National Housing Corporation (NHC) will build shopping malls, offices and other commercial properties to raise funds and increase the marketability of its projects.

Newly appointed chief executive Andrew Saisi said the State corporation will put up commercial properties next to its projects as a response to growing demand for houses that are serviced by gyms, cafes, banks and other facilities typically located in office blocks and retail malls.

“People want to live where they are close to facilities such as shopping malls,” said Mr Saisi. The corporation plans to put up commercial properties in Nairobi, Nakuru, Nyeri and Meru where some of its new housing projects are coming up.

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NHC has traditionally constructed and sold houses and used proceeds to build more units.

NHC’s decision to go into commercial property is meant to take advantage of the market segment that has grown by an average rate of seven per cent over the last two years, which is higher than the residential market expansion of four per cent over the period.

Property consultants say there is still demand for shopping malls and offices since developers have concentrated on residential houses.

“The retail sector has been stable over the past five years due to developers placing more focus on the residential and office markets. Vacancy and occupancy rates were low in Nairobi in 2014 and this is set to continue in 2015,” said a 2014/2015 annual report by property consultancy Broll Group.

Broll data indicates that the East African region has a shopping centre density of 3.7 square metres per 1,000 people which is far lower than that of South Africa at 127 square metres per 1,000 people.

The housing agency is looking at new ways to raise funds it needs for the construction of 30,000 housing units over the next three years. Of the 30,000 units that are coming up 5,000 have been set aside for the low income segment.

Part of the new capital-raising strategy includes issuing a Sh5 billion bond in the capital markets. Mr Saisi said the housing agency is finalising the appointment of transaction advisors.

The bond was initially meant to be launched by the end of August but there have been delays in getting approvals. To bring down the cost of home ownership, NHC will construct 50 per cent of the new houses using prefabricated technology.

“This will save us up to 50 per cent the time it takes to construct a house and reduce cost by 30 per cent,” said Mr Saisi. NHC has invested in an Expanded Polystyrene panels manufacturing plant located in Mavoko, Machakos County.