National Housing Corporation (NHC) plans to float its inaugural Sh5 billion housing bond in the second half of 2015 as it seeks to double the annual supply of homes.
The State-owned firm said proceeds from the corporate bond, set to be listed on the Nairobi Securities Exchange, would be used to deliver more than 3,000 residential houses in Nairobi metropolitan area, Mombasa and Kisumu.
Part of the proceeds from the housing bond are expected to boost production at its expanded polystyrene panels (EPS) factory in Mavoko, Machakos, which makes panels used in building low-cost houses.
“The housing bond will be floated in the coming financial year from around July. It will help us increase our housing output,” acting managing director Henry Maina told the Business Daily.
“We opted for a bond because it is cheaper than bank loans and we can easily raise such high capital from the public.”
The housing bond will finance building of maisonettes in Stony Athi in Mavoko where NHC owns 150 acres, as well as flats in Mombasa and Kisumu.
NHC is a State-funded agency charged with supporting and developing affordable housing and real estate in Kenya. It is putting up housing projects worth Sh3 billion in the current financial year.
NHC currently supplies about 1,500-2,000 residential units every year, through a mix of schemes such as mortgage, rental houses, tenant purchase programmes as well as site and service schemes.
The agency is expected next month to disclose the consortium to arrange the NHC housing bond. It is currently evaluating received bid.
NHC said the financial consultant would advise on the tenor of the bond — between five and 10 years — as well as pricing.
The NHC housing bond will be tax-exempt, just like infrastructure bonds. Mr Maina said the strategy to turn to the securities market for capital would help wean NHC off State funding.
The agency says it only accounts for 10 per cent of total houses developed annually — due to budgetary constraints — limiting the agency’s role of stabilising house prices.
“We offer our houses at below commercial rates, which makes them very affordable and help check prices,” Mr Maina said.
NHC has developed more than 43,000 units since inception in 1967, including estates such as Ayany, Kyuna, Uhuru Gardens, Kibera Highrise, Jonathan Ng’eno, Nairobi West, Madaraka and Kileleshwa in Nairobi.
Completed projects in other towns include Changamwe in Mombasa, Milimani estates in Kisumu and Kitale, Nakuru’s Section 58, Section 9 (Thika), Elgon View (Eldoret), Nyanchwa (Kisii), Amalemba (Kakamega) and Pembe Tatu in Nyeri.
The cash from the housing note will be used to increase the output of the EPS factory which has an annual production capacity of 126,720 panels.
Use of EPS panels in roofing, walling and flooring cuts building costs by nearly half.
“The factory produces quality and affordable construction materials using new technology, which will go a long way in provision of adequate and affordable housing,” said Mr Maina.