Derisking developers and access to credit can boost housing

Lenders have in the recent past been tightening credit towards the real estate sector as non-performing loans related to the property development continue to balloon. Sluggish economic growth for last half of 2017 has undoubtedly had an unpleasant ripple effect and dampened the prospects of the property market.

This is despite the country being ranked the third most preferred real estate investment destination globally for the super-rich after the UK and the US, according to Knight Frank’s Attitude Survey.

The study established that 24 per cent of Africa’s rich have property in Kenya.But it is not the fortunes of real estate sector alone that has been affected by tough economic environment; the existential credit squeeze and a burgeoning public debt have cast a gloomy shadow on Kenya’s economic growth projections.

While large organisations continue to access credit through bonds, private placements and other capital raising avenues, banks have made it harder for individuals to access credit through introduction of stringent lending rules.

But a recent policy shift that has seen the government embark on an ambitious plan to build 500,000 affordable houses in the next five years might just shore up the fortunes of the real estate industry. Of note is that the Government has allocated a whopping Sh6.5 billion to the housing pillar of the Big Four Agenda.

Industry players in the real estate sector also have an opportunity to capitalise on the announcement that low-cost housing investors will get their corporate taxes halved to 15 per cent if they put up least 100 units per year.

The proposed amendment to the Employment Act which will see employers contribute 0.5 per cent of employees gross monthly salary to the National Social Housing Development Fund, while the employee will contribute 0.5 per cent of their monthly gross earnings will also act as some form of capital mobilisation for housing development.

The National Housing Development Fund will mobilize capital and offer certainty of sales. This will help de-risk the developers by offering certainty of sales in the form of an off-take undertaking that will allow the developers access construction financing.

It will also purchase the housing units for cash once construction is complete to allow the developers to recycle their capital and develop more units.It will also enable home owners by allowing ordinary Kenyans to save for an affordable home via and the Home Owners Savings Plan which they can use as a down payment towards their affordable house.

It will also offer home buyers the ability to purchase their homes via an affordable 25-year Tenant Purchase Scheme. The establishment of the Kenya Mortgage Refinance Company, a Private Limited Company, owned by commercial banks and Sacco's, will help Kenya grow its mortgage finance market for affordable housing by providing medium and long-term liquidity to mortgage lenders.

These new developments will anchor the growth of the real estate industry at time when there is a discernible shift from unsecured lending, with banks steadily focusing on effective management of savings and fixed deposits. This has a direct co-relation with the dip in uptake of units in the property market.

Dickson Wanjohi, GM, Migaa Golf Estate.