NHC plans Sh5bn bond as housing demand increases

The National Housing Corporation plans a Sh5 billion corporate bond whose proceeds will be used to build homes to meet the growing demand.

The bond, which is expected in the market before year-end or early 2010, will be the culmination of a drive to free itself from the shackles of government funding and chart own growth path by exploiting its healthy balance sheet.

The announcement comes immediately after a successful public infrastructure bond offer by power generator KenGen of Sh15 billion.

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Initial plans by the public housing agency to issue the bond hit a snag when the government backed off from guaranteeing it.

However, having turned around from a broke parastatal to recording growth, the corporation intends to hit the capital market road on the merit of ability to finance such public borrowing from future revenue stream.

NHC, which is tasked with putting up decent and affordable housing across the country, has set the ball rolling by calling on landowners interested to do business with it to express interest.

“We are looking for appropriate land so that when the bond is issued we can channel the funds to development and not keep the funds idle as we scout for land”, said Mr Darius Kirubai, the corporation’s procurement manager.

NHC targets to put up 10,000 units per year.

Mr Kirubai said the corporation is seeking to link up with land owners who wish to develop property but lack the financial means and also carry out construction.

The corporation will oversee the arrangements and earn commission from the business.

The corporation’s initial plans of providing finances for construction have been successful with applicants getting up to Sh1.5 million, said Mr Kirubai.

The property sector has been growing rapidly since 2005 due to high demand, which has pushed prices high, although some players attribute this to rising costs of inputs.

“The potential for putting up more houses is very huge as less than 10 per cent of Kenyans own homes... demand is very high but players in real estate are being constrained by the rising input cost, especially land, which now accounts for 30 per cent of the overall cost of development”, said Mr Daniel Ojijo of Mentor Group, a property agency.

Developers have blamed the high prices on cost of materials, land, and archaic building code that limits the size of housing projects, cutting them out the economies of scale.

High closing cost has also denied many potential homeowners from accessing finances for construction.