By Moses Michira
The National Housing Corporation (NHC) is planning to build thousands of low cost homes.This is a major shift in strategy for the public developer that has been leaning towards the middle income and top end segments.
Peter Njuguna, NHC managing director said that the shift to the down-end market was informed by the realities in the housing industry , where the shortage was widest amongst lower income earners.
“Our focus is to develop social and public housing targeting the members of the lowest income bracket”, said Njuguna, who was recruited late last year adding, “We have already invited potential investors.”
In the first round of construction, NHC expects to develop 10,000 homes across the major towns in two months. The finished units would then be offloaded to the market later in the year.
The homes will be built using prefabricated polystyrene panels from its yet-to-be commissioned factory in Mavoko. There are projected to sell at a discount compared to the prevailing market prices.
Savings will be realised from the building materials and the much lower labour costs considering that the estimated construction time for a unit would be cut down to under a month.
Proceeds from the sale of the houses, the bulk of them being in Nairobi and Mombasa, would create a large pool of funds to finance the development of the social housing projects.
The Corporation says all of its future real estate projects will seek to satisfy demand in the lower income brackets. This section of the population has been hit hard by the housing crisis.
It has been shunned by private developers. Recent projects developed by NHC had been tailored for the upper and middle income segment.
But the entry into the down- end market is expected to help in easing the acute shortage in lower income homes segments.
NHC’s construction financing will be sourced from investors in the private sector, who will be earn a return on a fixed rate for a specified number of years, through an equivalent of a housing fund. The funds generated would also create the necessary liquidity required to settle periodic interest payments to investors over the tenure of the debt.
“This model of financing construction should be a game changer in our property market and hopefully ease home prices,” observed Njuguna.
Houses For Sh1 Million
He said under the new social housing schemes, a three bedroom family home would sell at about Sh1 million. NHC has extended the call for investors to international real estate developers and financiers who will be willing to accept interest of about 6.5 per cent.
The corporation has in the past claimed that lack of cheap funds was its biggest challenge in addressing the biting shortage of housing, a problem that its new financing model hopes to tackle.
NHC has already invested in a land bank where all the housing projects will be developed with a tentative ground breaking set for March.
The Nairobi Securities Exchange also hopes to introduce a new asset called a Development Real Estate Investment Trust that would enable big developers raise funds from the market that would be invested in the development of housing.