Financial Standard

Will Britam take over mortgage firm Housing Finance?

“I don’t see an immediate impact on property prices and lending rates. The industry already has other players,” said Kingdom Securities CEO Geoffrey Odundo, adding that the transaction is meant to be a win-win situation for both Britam and Equity Bank.

“Britam will be able to focus on strengthening its real estate business. They will also have a financier who is more likely a partner. Equity Bank will have to reinvest the proceeds of the share sale in other areas that guarantee them high returns, and they will also be able to carry out their mortgage business independently.”

Mr Kenneth Kaniu, a chief investment officer at investment management company Stanlib Kenya, pointed out that HF and Britam stand to benefit from each other in terms of financial support.

“I think what happened has been viewed quite positively. Obviously Britam is going to enter the property market and acquire a financial partner who is able to provide capital when the need arises,” he said.

“It is a good opportunity for Britam in terms of access to capital and distribution of its products in the real estate sector.”

Public concern

According to Mr Francis Mwangi, head of research at Standard Investment Bank, the likely impact of the transaction can only be evaluated once Britam outlines its strategies after the acquisition.

“It is important to wait and hear what Britam will have to say about the acquisition. So far, they have not commented, but I don’t believe they would want to be passive after acquiring a huge stake in HF. They would want to do business.”

The state of Kenya’s mortgage market has become a matter of public concern, with the low uptake of these loans largely attributed to inadequate access to finance for low-cost housing and lack of appropriate financial solutions.

Further, limited access to long-term funds has made commercial banks reluctant to commit huge portions of their short-term deposits to long-term mortgage loans.

Other barriers to the development of a vibrant mortgage market in Kenya include complex legal and regulatory frameworks, complicated land and property registration procedures and volatile inflationary pressures.

The high cost of construction combined with the difficulties in accessing land have not helped matters.

Kenya has a large housing deficit, which is widening every year. Out of a total 150,000 housing units required annually in urban areas, only 35,000 units are produced. The deficit is largely filled by slum dwellings and own-construction of poor quality shelters.

Housing gap

Other impediments to home ownership cited include limited research on low-cost building materials and construction technologies, and stringent planning regulations and standards.

According to the World Bank, the housing gap can only be partially ?financed by mortgages. Lower income groups require other solutions, such as housing microfinance.

Among the measures proposed by commercial banks to spur growth of the mortgage sector are Government support for institutions such as the National Housing Corporation (NHC), digitisation of the ministry of Lands office to reduce the time taken to process transfer of properties, and full disclosures of all charges related to funding of mortgages to enable buyers make informed decisions,

Others are Government initiatives to oversee valuation to avoid arbitrary pricing of properties, reduction of stamp duty as well as taxes levied on construction materials, and support of the development of secondary mortgage markets as an alternative source of financing.

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