Financing Africa's real estate

1. How will the Shelter Afrique bond benefit Kenya’s real estate market?

We raised the bond when the interest rates increased. Our base rates currently stand at 13 per cent. This is because we got the resources at reasonable costs thanks to the structure of the bond. We pass the benefits of low interest rates to the developers who in turn pass them to the market and the end users. That is the only way the real estate market will benefit from our bonds.

2. What are some of the housing projects you have undertaken in Kenya?

We have financially supported more than 100 housing projects in Kenya. We do housing estates and in most cases help developers build houses for the low and middle-income earners within a range of Sh4 million to Sh10 million. This is where majority of the population falls.

3. How has Shelter Afrique added value to project financing?

We always review all technical and financial documents prepared by the developer seeking our financing. We are able to determine whether the project is well documented and has received the right approvals from the Government and local authorities. We also check whether due diligence was followed and whether the developer has the capacity to implement the project. We also provide expertise and technical advice on the project.

Alassane Ba, Managing Director, Shelter Afrique. The company started trading its Sh2.5 billion three-year bond at the Nairobi Securities Exchange on September 20, 2011

4. Do you also support small developers?

Yes we do. As Shelter Afrique, we value everyone and we have supported the small and medium-size developers to encourage their involvement in housing delivery. We have the residential real estate programme that targets housing development for all income categories, including single and multifamily homes, provided they meet our lending criteria.

5. As a Pan-African organisation, how do you think the Kenyan real estate market compares to the rest of Africa?

Kenya is one of the best real estate markets in Africa. This is because of the market structure that ensures demand is always high. We have developers keen on bridging the housing gap and an expectant market that is always ready to take these houses. It is the reason why we have done over 100 projects in Kenya to the tune of Sh200 million.

6. What is your social housing programme?

It is a proposal to establish special housing programmes in collaboration with the member governments to promote access to affordable housing and infrastructure services to the poor and low-income groups. This programme proposal has different perspectives. The first one involves the government offering the land and then we fund the developers to build affordable housing.

The second scenario is through the municipalities, which offer the land and then we develop rental houses. And finally, we could have a bidding process where we invite developers to bid to build these houses. The government then buys them from the developers and sells the houses to the needy people at a subsidised price.

7. What are some of the challenges you have faced in the real estate market in Kenya?

The Kenyan real estate lacks large-scale developers, which is the main reason for the housing deficit. Large-scale developments would ensure the provision of many affordable houses.

Another challenge is that few developers are adapting to the use of green energy. We would like to see proposals and designs that embrace green building technology for a safer Africa. Lastly, the high interest rates in loans is also a big challenge as it raises the construction costs. This hikes the final cost of the houses, making them unaffordable for the low-income population.

At Shelter Afrique, we are ready to deal with the challenges by putting our risk capital at work in order to help build strong champions to change the dynamics and economics of the markets.

8. What are your lending policies?

Our lending policies are dynamic and take into account market needs. The driver is the project. As long as the project is viable, we can provide financial solutions. The main requirement is that the borrower should own the land and the land should be free of encumbrances. We can lend to the borrower up to 60 per cent of the total cost of the project. In short, the only security we take is the land. All securities such as escrow account, project account and performance bond are internally driven. If the project is co-financed, we can harmonise all conditions with co-financiers.

9. Do you support real estate projects outside Nairobi?

Yes. We finance projects in Mombasa, Kisumu and Nakuru.

10. Do you finance the purchasing of building materials?

We recently launched our trade finance for building materials and construction equipment. All suppliers and financial institutions are eligible. They should send their applications to Shelter Afrique for funding.