- Title: KENYA: Housing Finance eyes more funding
- Date: 12th April 2013
- Summary: NAIROBI, KENYA (APRIL 11, 2013) (REUTERS) VARIOUS OF BUILDING UNDER CONSTRUCTION SIGN WITH DETAILS OF BUILDING PROJECT SIGN WITH A PICTURE OF VISION OF FINISHED BUILDING CHIEF EXECUTIVE OF HOUSING FINANCE, FRANK IRERI, IN INTERVIEW (SOUNDBITE) (English) CHIEF EXECUTIVE, HOUSING FINANCE, FRANK IRERI SAYING: "There is something we're looking at probably for the second half
- Embargoed: 27th April 2013 13:00
- Keywords:
- Location: Kenya
- Country: Kenya
- Topics: Economy
- Reuters ID: LVAEMYTWV3ERMHOL87J6JHC29QS7
- Story Text: Kenya's Housing Finance company is looking to raise more funds in the second half of this year and increase mortgage lending as it expects last month's peaceful elections to spur demand for houses.
Kenya's second biggest mortgage lender will finalize plans for more funding in the next few months, said Frank Ireri, Chief Executive of the Housing Finance.
"There is something we're looking at probably for the second half of the year, we will be looking to raise more money. Either we will do it locally or offshore or both. We haven't made a final decision yet on the timing and the amount yet. This will now be dependent on the sort of activity we see now over the next three to four months," said Ireri.
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 percent.
Industry experts say Kenya has a demand of 250,000 housing units but only manages to supply 60,000.
Yet, there are less than 20,000 mortgage accounts in Kenya, a nation of more than 40 million people.
Housing Finance offers individual mortgages at 18 percent and that rate is expected to come down.
However, a majority of Kenyans are still averse to borrowing because of high additional costs and the long process of acquiring land documents required for collateral.
"There are several factors that contribute to that. Now yes, interest rates is one. Two, is what we call the closing costs or the incidental costs cause you know one has to raise a deposit, one has to raise stamp duty, one has to raise legal fees, one has to raise evaluation fees, not that many people can afford that... so those are really your two sort of key challenges. The other would also be around land titling, you know we are still having issues of land titling and you know banks will not or should not give mortgages unless you have a valid secure title, so that's another challenge we are seeing in the market," he said in an interview for the Reuters Africa Investment Summit.
Kenya's election last month allayed fears the east African country would descend into chaos again as in the last election five years ago, and led to expectations of higher consumer spending.
Housing demand is also expected to receive a big boost in coming years from recent oil and gas discoveries in the region.
Ireri said he sees property investments rising in the second or third quarters of this year.
"The whole housing challenge cannot be solved by any one player, it needs a lot of players, private sector players government players to either come together and each play their role towards housing. Again, there are different target groups. There is upper, middle upper, middle, lower etcetera so depending on where one wants to focus. So yes there is increased competition and I think we will even see more and especially now with the peaceful elections we had I think we are going to have a lot of foreign investors coming in into the property space, which is good for the country as a whole," said Ireri.
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.
"Some of our neighbouring countries don't have developed financial markets to handle long term lending, so you can't go into south Sudan and give someone a 15-year loan today. So you take each market on its own, see what the needs are and then know how best to enter," said Ireri.
Housing finance, which controls 35 percent of the Kenya's mortgage market, is also planning to list real estate investment trusts (REITs) on the Nairobi bourse. - Copyright Holder: REUTERS
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