Housing Finance (HF) has partnered with a Riruta landowner on a 50:50 basis to construct 328 houses as the surging cost of urban plots pushes developers to offer idle-land holders equity.
The mortgage financier is injecting Sh186 million of its recent bond proceeds into the housing project dubbed Precious Gardens, which comprises one, two, and three bedroom units.
The units in the Nairobi suburb will retail at Sh3.95 million, Sh5.25 million, and Sh6.5 million respectively and are targeted at meeting housing needs of the growing middle class.
National Housing Corporation (NHC) recently invited rich investors to enter into similar pacts where the corporation offers land in exchange for their capital injection.
(Read: NHC offers investors 6.5pc return on joint property ventures)
“The high cost of land in urban areas and the complicated land acquisition process have continued to hinder delivery of affordable housing,” said HF’s managing director Frank Ireri.
“HF is exploring partnerships, collaborations and joint ventures with persons with huge tracts of land where the company can leverage to develop a substantial number of housing units,” he said.
Precious Gardens is the first project the financier plans to construct using this model as it gears up to build 550 more such houses through a similar one later this year.
(Read: HF partners with land owners in real estate investments)
Last year, HF raised Sh3 billion through a bond for mortgage financing and onward lending to property developers with half of this set aside for building homes targeting middle and lower income earners.
In the joint venture model, HF will provide between 25 and 60 per cent of the equity for construction whereas landowners will give their property as contribution.
Kenya has a housing shortfall of 150,000 units annually with the lower and middle sections of the market hardest hit as investors keep away citing low returns.
Developers also attribute lack of supply in the bottom-end of the pyramid to shortage of land — and hence high premium on plots — for large housing projects.