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Housing fund set to issue asset-backed securities


Workers at a construction site in Kisumu. FILE PHOTO | NMG

The Treasury plans to seek financing from the capital markets to raise part of the affordable housing fund, using the completed homes as security.

The Development Framework Guidelines for the plan show that the housing fund plans to issue mortgage-backed securities targeting a wide range of investor types to augment the money raised by statutory deductions from salaried employees, voluntary contributors, debt and grants from development partners.

“The housing fund will issue mortgage-backed securities (MBS) in the local capital markets on a regular basis backed by the affordable housing units and the tenant purchase certificates issued to homeowners,” the guidelines say.

“The MBS will be issued in the following classes: short-term/money market notes of up to five years targeted to money market funds and short-term investors and banks, medium-term notes (five to 10 years) targeting banks, insurance companies and fund managers and long-term notes (10-20 years) targeting pension funds and life insurance funds.”

The Ministry of Housing has, however, disclosed that this asset-backed financing will not be the primary source of funds for the housing plan, especially in the first two years.

The ministry in separate regulations has disclosed that it will take at least five years for most contributors to start buying houses, meaning that it could be some time before the tenant certificates become available for use to issue bonds.

“Member contributions will initially be sufficient to meet any offtake guarantees the fund executes,” the ministry says in the guidelines.

Salaried employees who number about 2.5 million are to be deducted 1.5 per cent of their gross salary each month — matched by a similar contribution by the employer — towards the housing fund, which will raise about Sh57 billion a year for the exchequer.

Voluntary contributors will be forking out a minimum of Sh200 per month if they want to become part of the fund, with house purchase being limited to members who are contributing regularly.