24 February 2014

Kenya Housing Gets U.S.$7 Million Credit

Nairobi — Multi-state owned East African Development Bank (EADB) and mortgage lender, Housing Finance will co-finance construction of a housing venture backed by the latter with a $7.3 million credit line.

The two institutions signed the agreement yesterday to finance the construction of Kahawa Downs, a joint venture between Housing Finance and the Mbugua Kibathi family which owns Sagret Hotels in Nairobi.

Kahawa Downs will deliver 220 units of two-bedroom (70) and three bedroom (150), which are being built in 22 blocks of 10 units each. The development sits on five acres of land at Kahawa Sukari on Thika Road and will have a commercial block and a kindergarten.

HF's subsidiary KBS is managing the project in which the mortgage lender has contributed $1.2 million.

Construction started last November and will cost about $14 million to complete, according to KBS executive director James Karanja.

Units are for sale at Ksh5 million (about $57,000) and Ksh6 million ($69,000) each for the two-and three-bedroom respectively, which has seen bulk-buying by buy-to-let investors and speculators seeking to flip at a higher price (capital gains) by completion.

"Growth of the middle class, rapid urbanisation and emergence of growth centres in counties has presented business opportunity for private and public sectors to provide housing to meet increased demand," said Vivienne Yeda, EADB's director-general.

"Our interest rates to commercial clients are below market rates to enable them pass over the benefit to end-buyers," she said.

Kahawa Downs is HF's second joint venture having struck the first in Riruta Satellite that will have 328 units of one-to three-bedroom. The JV - christened Precious Gardens - sits on a 5.4-acre parcel of land. KBS contributed Ksh186 million in equity with construction co-financed by HF and Shelter Afrique - a pan-African housing lender.

Frank Ireri, HF managing director, said the lender aims to be "a one-stop-shop" for housing solutions, hence its involvement in the entire supply chain. It has diversified its funding sources to include bonds and sovereign debt.

"We have a pot of $30 million (Sh2.59 billion) just for foreign currency-denominated mortgages," Ireri said.

Under the new product, it has already lent $5 million (Sh431 million) to the Buffalo Mall Development in Naivasha and $10 million (Sh861.8 million) to a local private university.

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