Cash-flush banks race for housing projects

The battle for mortgage business is intensifying as cash-flush institutions such as Kenya Commercial Bank and Housing Finance pour cash into more housing development projects.

The courtship of developers has reached fever pitch, with previously laid-back institutions now aggressively going out for customers.

They are not only forming clubs for developers but also wooing them into more and even bigger housing projects.

On Thursday, KCB announced a trip starting May 16 for its club of housing developers to China.

They are expected to get opportunities for contracts for supply of cheap construction materials to reduce costs brought about by expensive local materials.

The developers are also supposed to learn other and possibly better elements of the Chinese architecture.

Apart from private developers, the group also includes quantity surveyors, engineers, estate agents and architects.

KCB, for example, is raising a hefty Sh21 billion to be used in the next five years in expansion in lending, with a liquidity figure now at nearly double the statutory minimum.

It has near-idle cash to the tune of Sh35 billion sitting in government securities, a 67 per cent rise from the situation in December, 2009.

It is part of the bank’s drive to increase lending to the construction sector following the merger between the S&L subsidiary into the main commercial bank, KCB.

The bank, just like Housing Finance, has also been signing contracts with individual organisations to obtain mortgages for staff.

Ms Caroline Kariuki, KCB’s director for mortgage division, said assimilation of S&L into the larger KCB Group early this year had given the organisation a great opportunity to tap into the resources of the larger company.

She said: “Our reach now covers over 168 branches countrywide, including centres that provide personalised services to our customers. It has also given us the capability to venture into long-term financing of huge development projects that a client may wish to take up.”

The bank need to take advantage of its huge coverage by advancing more loans and hence the need to incentivise the developers by lowering their costs in housing construction.