HF to cut house loan size in bid to double its lending uptake

HF Group CEO Robert Kibaara. FILE PHOTO | NMG 

In Summary

• HF is turning its focus to affordable housing financing.
• The shift is informed by the higher demand in the lower-cost housing segment, where there is a market gap that can be exploited.
• The average mortgage loan size stood at Sh10.9 million Sh9.1 million in 2016, which is well above the reach of the average Kenyan.

By CHARLES MWANIKI
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Mortgage financier HF is turning its focus to affordable housing financing as part of a plan to double its housing loans to 12,000 in the next two years.

The lender’s books have in the past year taken a hit in line with the slowdown in the property market, leading to a net loss of Sh598.2 million last year compared to a profit of Sh126.2 million in 2017 on the back of lower interest income.

It has as well suffered with rate capping with long-term funding becoming a major problem.

Group chief executive Robert Kibaara told the Business Daily in an interview that the shift is informed by the higher demand in the lower-cost housing segment, where there is a market gap that can be exploited.

“We want to double our mortgage loans from the current 6,000 in the next two years,” said Mr Kibaara.

“Our plan is to now focus on affordable housing—in Nairobi these would be loans of between Sh4 million and Sh4.5 million—because that is where the demand is to be found.”

Big Four Agenda

The plan, he added, is partly dependent on the Government’s Big Four housing programme that will in part sort out support infrastructure such as roads, electricity, water and sewerage. Developers of low-cost housing have been unable to put up units in desirable areas due to the high cost associated with setting up the support infrastructure, which has in turn inhibited the mortgage market by pricing out most of the working class from home ownership.

Those setting up such units are forced to do so on the periphery of the city, where it is proving hard to find ready buyers due to the distance and infrastructure factor.

Latest Central Bank of Kenya data shows that there were 26,187 mortgage loans in the market in December 2017, which was an increase of 8.8 percent or 2,128 loan accounts compared to 2016

The average mortgage loan size stood at Sh10.9 million Sh9.1 million in 2016, which is well above the reach of the average Kenyan given that the average interest charge on the loans stood at 13.57 percent during the year.

Part of the reforms that CBK called for in the annual banking sector report of 2017 was the development of low-cost housing options in order to grow the mortgage market.