Markets & Finance

Shelter Afrique eases mortgage terms for low-end borrowers

project

A housing project in Kisumu County. Borrowers of home loans from Shelter Afrique’s latest grant will pay below market interest rates. Photo/FILE

orrowers of home loans from Shelter Afrique’s latest grant will pay below market interest rates, the firm has said.

The financier said interest rates on its €3.7 million (Sh442 million) grant from the French Development Agency (AFD) would be capped at 13 per cent for end users.

“The end user will not pay more than 13 per cent,” said Shelter Afrique managing director Alassane Ba.

Shelter Afrique will lend the money to microfinance institutions who will in turn lend to their customers.

The AFD said that between 250 and 500 households will benefit from the pilot before the product is rolled out to other markets where Shelter Afrique operates.

The grant targets the low end of the market where there is a huge demand for housing but limited supply due to high interest rates.

Shelter Afrique has previously said that its target market is houses priced at the Sh1 million level. Data from Hass Consult shows that as at December 2013 mortgage rates were between 13.9 and 19 per cent.

READ: Shelter Afrique gets Sh436m loan for mortgage lending

French ambassador to Kenya Rémi Marechaux said that it was possible for loans under the grant to be advanced below market rates since the money was being raised from foreign markets where interest rates are lower.

“The main reason is the high cost of funds in local currency borne by the financial institutions,” said Mr Marechaux.

The AFD will also give an additional €500,0000 (Sh59.7 million) for training plumbers, carpenters and porters.

This is the second loan since last December that Shelter Afrique has received from the AFD when it got a Sh436 million grant for onward lending.

At the time Shelter Afrique said that it expected that the loan would benefit around 4,000 borrowers.