By Nicholas Waitathu
Nairobi, Kenya: Shelter Afrique, the Nairobi-based pan-African housing finance institution, will finance property development firms constructing low-cost housing in Kenya.
The organisation has set aside Sh430 million ($5million) to advance to the institutions operating at the low-end market in the country. The loans will be advanced at rates lower than the prevailing market rates.
Shelter Afrique Managing Director Allasane Ba said extension of credit to fund the development of low-cost housing conforms to his organisation’s spirit of improving the lives of people living at the bottom of the pyramid.
“Part of our focus in 2014 is to assist organisations operating in the low end market develop low-cost housing to cater for the increasing demand,” Ba said, adding that they would start advancing the loans early this year.
Institutions likely to benefit from the fund includes saving and credit cooperative societies currently owning huge chunks of land on the outskirts of major urban areas.
Social enterprise groups, chamas and investment clubs buying and developing low-cost housing, will also benefit.
Currently, commercial banks are offering interest rates at a minimum of over 13 per cent while saccos are extending loans at 12 per cent on a reducing balance. The credit by Shelter Afrique will be advanced at rates below 12 per cent.
Kenya is grappling with a huge supply gap of over 250,000 housing units annually mainly in the urban areas against a supply of 50,000 units both by the government and the private sector.
During the opening the 11th Parliament in April last year, President Uhuru Kenyatta said the government would increase resources towards construction of low-cost housing to cater for the surging population.
Desire by the majority of Kenyans to own homes has been frustrated by high mortgage rates and highly priced land and high cost of building.
For example, in the urban centres, over 70 per cent of residents live in slums while about 30 per cent have houses in the middle and upper segments of the market.
The high number of Kenyans seeking shelter in the slums is increasing everyday because of rapid rural-urban and urban-urban migrations.
Stay informed. Subscribe to our newsletter
According to the World Bank, 250,000 people migrate to urban areas every year with the majority of them seeking shelter in informal settlements.
By 2030, it is estimated that 37 urban centres in Kenya will have population of more than 100,000 people.
“As enshrined in our strategic plan, in 2014 financial year, our focus is to assist institutions operating in the low end of the market so that they can construct more low-cost houses to house the increasing population,” Ba said.
Shelter Afrique, in conjunction with Kenya Government and UN-Habitat, will launch a low-cost home construction project in Mavoko County in February.
The project is expected to produce 2,500 housing units to house 2,200 slum families. Ba said the houses to be constructed on a 65-acre piece of land would be undertaken in phases, with the first phase commencing in February at a cost of Sh1.7 billion.
The project will have a mixture of one-bedroom, two-bedroom and three-bedroom units.
A one-bedroom unit of between 30 and 60 square metres will cost about Sh425,000 (US$5,000). Three bedroom houses, to cater for the middle-income bracket, will be sold at the market rate of about Sh6 million.