NHC secures funds to build 800 houses in city

National Housing Corporation has entered into a funding deal with Kenya Commercial Bank (KCB) for construction of 800 units in Nairobi.

The partnership that will see the lending rate negotiated to below the normal 13.5 per cent rate comes at a time when the corporation is seeking cheaper funds.

Mr James Ruitha, the corporation’s managing director, said the funds will enable it to construct more houses and enhance uptake through mortgage financing for the end home buyers.

“We are optimistic that this partnership with KCB will unlock the production and consumption in the housing industry by funding the construction and final selling of our housing units,” he said.

Mr Ruitha said raising capital has been a challenge and the development loan will be used in the short-run, as National Housing Corporation (NHC) seeks cheaper alternatives.

The bank lends to the housing industry at 13.5 per cent, but NHC will get a lower rate depending on the size of loan.

NHC is banking on the partnership to develop 833 units in Nairobi’s Kileleshwa, Madaraka, Nairobi West and Lang’ata estates, with the initial estimates indicating that the projects’ total worth is Sh6.2 billion.

The units will cost between Sh2.5 billion for a two-bedroom apartment in Lang’ata to Sh13 million for a town house in Kileleshwa.

The deal comes only weeks after NHC partnered with the Iranian housing corporation for the development of 2,000 units in Mavoko, with the corporation only providing land and technical expertise.

The corporation has intensified the search for financial partners in the recent past since it is unable to raise capital, a matter that was complicated when government turned down its request to raise Sh5 billion through a corporate bond.

Mr Bosire Ondego, the corporation’s chairman said this setback meant that NHC had to go through a credit rating test where it scored poorly going by its current financial position and its credit history.

“Our credit ratings indicated that the market would require a high premium on the borrowing, which would add about four percentage points to the cost of borrowing through government paper making it more expensive than credit from commercial banks,” said Mr Ondego.

Ms Caroline Kariuki, director of S&L, KCB’s mortgage arm, said that the recently concluded rights issue carried out by the bank which raised Sh12.5 billion has enabled it to increase its ability to lend to a single client up to four-fold.

“S&L is now able to lend up to Sh1 billion per single project up from the Sh250 million that we could before the rights issue,” said Mrs Kariuki.

Currently, S&L is financing the acquisition of half of the 600 units it the recently completed in Madaraka.