HF to start construction of 424 houses in Komarock by mid-year

Housing Finance (HF) will begin construction of 424 units at its Komarock site from mid this year in the second phase of a multi-billion shilling project.

The mortgage lender through its fully-owned subsidiary, the Kenya Building Society (KBS), is putting up the units on 32 acres it owns in the Komarock area.

Another 848 units will be constructed from October 2016.

HF chief executive Frank Ireri said part of the Sh3.5 billion the bank is raising through the ongoing cash call will go into the Komarock housing project.

Already 162 houses and a commercial centre are being built on the Komarock land and the management is looking at the possibility of packaging some of the properties into a Real Estate Investment Trusts (Reits).

Mr Ireri said one of the potential properties that can be packaged as an investment (I) Reit—where shares sold benefit from rental income—and sold to investors such as the pension funds and insurance firms is the commercial property.

By selling the commercial property as an I-Reit the housing firm will be free from the day-to-day running of the mall, allowing it to concentrate on lending and development through KBS.

“We’re not in the business of running the mall until we set up a property management firm under KBS,” Mr Ireri told the Business Daily.

The information memorandum on the on-going rights issue says the Reits are also meant to give the company additional sources of funds in addition to its own funds and debt.

READ: Britam to defend large HF stake in Sh3.5bn cash call

“REITs are expected to provide access to the capital markets thus reducing funding risk due to reliance on debt and enhance liquidity. Housing Finance, through its subsidiary Kenya Building Society has lined up various projects that would be implemented through REIT structures.”

Proceeds from the rights issue are also expected to go towards growing the lender’s loan book. Analysts expect an uptake of mortgages as interest rates begin to go down.

“With the government’s concerted push for a lower interest regime whereby KBRR (Kenya Bankers Reference Rate) has shed off 59 basis points since introduction, higher disposable income in the middle class bracket should spur greater mortgage financing uptake,” said a note on HF by Genghis Capital.

The KBBR stands at 8.54 per cent from 9.13 per cent as at December with room for a further drop should the government reduce its borrowing.

Britam, the largest shareholder in HF with a 46.08 per cent stake, has committed to participate in the rights issue which will see the firm invest Sh1.6 billion.