Housing Finance explores new funding opportunities

Rising middle class in Kenya has meant demand for housing has outstripped supply.

By James Anyanzwa and Reuters

Housing Finance is reviewing fresh funding options to support its expanding mortgage business.

This comes in the wake of peaceful elections that is widely expected to drive demand for more houses. 

“We have not yet agreed on any particular financing option at the moment but we will review them in the third quarter when business picks up,” Managing Director, Frank Ireri, told The Standard On Sunday on Saturday.

The premier mortgage lender is finalising plans for more funding in the next few months, having sold the last tranche of Sh10 billion (US$118.5 million) bond last year.

Everything in place

The peaceful election last month allayed fears the east African country would descend into chaos again and led to expectations of lower interest rates and higher consumer spending.

“We will be looking to raise more money. Either we will do it locally or offshore or both,” Ireri told the Reuters Africa Investment Summit on Thursday, while keeping the amount to be raised under wraps.

The company, which is involved in housing development as well as finance is eyeing a bigger share of Kenya’s booming housing market and also a maiden entry into other regional countries.

Ireri said Housing Finance would use different strategies in other east African markets due to the small size of their financial sectors.

“You can’t go into south Sudan and give someone a 15-year loan today,” he said.

A rising middle class in Kenya has meant demand for housing has outstripped supply for decades, and the sector has outperformed other asset classes such as stocks and bonds, with annual returns of up to 30 per cent.

Housing demand is also expected to receive a big boost in coming years from recent oil and gas discoveries in the region.

“I think we’re going to see a lot of foreign investors coming in to the property space,” Ireri said, adding he expected property investments to rise in the second or third quarters of this year.

Mortgage uptake has remained very low in the region, he said, hindered by high interest rates, high cost of accessing loans and the bureaucratic difficulty of getting land ownership deeds that lenders require as collateral. There are less than 20,000 mortgage accounts in Kenya, a nation of more than 40 million people.

Housing finance, which controls 35 per cent of the Kenya’s mortgage market, is also planning to list real estate investment trusts (REITs) on the Nairobi bourse.

Kenya’s capital markets authority is working to introduce REITs, high-yielding securities that trade like stocks.

Ireri noted that the impending introduction of REITs might boost real estate earnings.