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Continental housing body seeks to raise Sh500m through NSE

BUSINESS
By - James Anyanzwa | November 23rd 2012

By James Anyanzwa

NAIROBI; KENYA: Pan African housing and urban development financier Shelter Afrique has commenced sale of a Sh500 million three-year bond through the Nairobi Securities Exchange (NSE).

The issue, which concludes on December 5, is the second and final tranche of a Sh3 billion medium term note, which was approved by the Capital Markets Authority (CMA) in July last year.

The funds will be used to finance low cost urban housing projects across the country.

The company has appointed CfC Stanbic Bank and Dyer and Blair Investment Bank as arranger and sponsoring stockbroker respectively.

Unsecured

The issue, which consists of, both senior unsecured fixed and floating rate notes, will be listed on the Fixed Income Securities Market Segment (FISMS) of the NSE.

However, the issuer (Shelter Afrique) could not divulge details on the pricing of the bond.

Last year, the firm issued the first tranche of its bond amounting to Sh2.5 billion and commercial banks snapped up nearly half of the corporate bond, reflecting the lenders’ huge appetite for “good” lending opportunities.

The banks took up 47.2 per cent of the bond followed by institutional investors who bought 42.9 per cent and retail buyers who were allocated 9.9 per cent of the medium-term paper.

The bond was sold with floating and fixed rate components, which were subscribed by 60 per cent and 40 per cent respectively.

Approved

Managing Director Alassane Bâ said projects to benefit from the money raised had already been approved by the Board.

Mr Bâ explained that there are 10 residential development projects with an estimated project cost of Sh9.4 billion in Kenya that will be financed from the proceeds of the bond.

“Shelter Afrique has committed to financing 34 per cent of the total project cost or an equivalent of Sh3.2 billion,” Mr Bâ said.

He said there was a growing need for viable options for funding housing development, against the backdrop of a growing demand for housing that surpasses supply.

Kenya has a low-level urban home ownership estimated at only 16 per cent and with expansive slums and informal settlements.

It is estimated that out of a total 150,000 housing units required annually in urban areas, only 35,000 units are produced.

High cost of finance, lack of serviced land, high cost of building and construction materials, inappropriate building and construction technologies, limited research on low cost building materials and construction technologies, stringent planning regulations and standards and, high cost of infrastructure have hindered the development in real estate sector.

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