Companies

HF to launch two major Thika Road housing estate projects

HF

HF Group head office at Rehani House on Kenyatta Avenue in Nairobi. PHOTO | FILE

Housing Finance (HF) is set to launch two major housing projects along Thika Road this year, marking the latest real estate development that is seeking to attract more residents along the super highway constructed three years ago.

The mortgage financier also plans to build the second phase of apartment units in Riruta, dubbed the Precious Heights estate. The three projects will see HF build an additional 1,500 units in total.

“The projects are joint ventures with land owners. They provide the land and we finance the development,” said chief executive Frank Ireri, who however declined to reveal the value of the projects.

The mortgage firm says it will break ground on the second phase of its Precious Heights apartments in Riruta next month, while parceling work on an 183-acre serviced plots scheme in Ruiru (Theta Grove) is expected to commence in July.

HF will also start construction of two and three-bedroom apartments at Clayworks along Thika Road in September.

The Nairobi Securities Exchange-listed firm is increasingly opting for joint ventures with land owners citing the rising cost of land in urban areas.

It has taken a 50 per cent stake in previous joint ventures including Kahawa Downs, an entity through which it built apartments in Nairobi’s Kahawa Wendani.

In such 50/50 equity partnerships, HF has contributed capital equivalent to the value of the land provided by the co-investors.

The real estate projects are part of HF’s strategy to grow and diversify its business that has largely relied on financing purchase and construction of houses and commercial buildings.

HF, which recently placed all its subsidiaries under a non-operating holding company, is now seeking a larger presence in property development, bancassurance, retail and corporate banking.

Real estate developers have been enjoying double-digit returns from sale of houses and serviced land parcels in major towns.

Besides real estate development, HF has also been opening more bank branches in a bid to grow its customer base, which is expected to lead to a lower cost of funds in the form of deposits.

READ: Housing Finance after-tax profit hits Sh1.1bn on higher lending

A larger customer base is also expected to help the firm generate more fees from banking transactions.

Mr Ireri said HF would soon seek a medium term debt from development finance institutions to fund its growth plans.

He did not say, however, how much the company will be borrowing, only indicating that the funds will be used to supplement its tier II capital.

Housing Finance recorded a 22.7 per cent growth in net profit for the year ended December on the back of increased lending.

The mortgage financier’s net profit in the period stood at Sh1.1 billion compared to Sh975.3 million the year before.

The firm’s loan book expanded by Sh7.7 billion to Sh53 billion, helping to raise its total interest income 27 per cent to Sh8 billion.

Its interest expenses increased 34.2 per cent to Sh4.4 billion, reflecting the growth of deposits and the rise of interest rates in the second half of last year.

HF’s customer deposits expanded by Sh5.5 billion to Sh41.6 billion, with interest rates having surged to highs of 27 per cent from October last year.