Mortgage financier HF has put on sale more customer houses in towns outside Nairobi to recover distressed loans, pushing the total amount the lender is targeting in the latest round of auctions at more than Sh2.5 billion.
The Sh527.4 million properties under auction are located in Mombasa, Nakuru, Eldoret and Kisumu, being the four largest towns outside of the capital.
Housing Finance (HF) has already put on sale property worth Sh2 billion in Nairobi.
The move to sell the houses, which the bank’s managing director Robert Kibaara has termed an ongoing exercise, is meant to trim the lender’s stock of bad loans that grew to Sh12.97 billion at the end of March from Sh8.47 billion a year earlier.
The lender said in its 2019 annual report that these non-performing loans are predominantly the result of developers it had financed being unable to service their debts. Many of them failed to realise projected sales revenue, attributed to the slowdown in the real estate sector.
Mr Kibaara said in an interview that while the bank was auctioning the houses as part of normal debt collection process, some have taken the option to have the institution dispose of their houses at market rates to recover its dues, and leave them with the balance in what is known as sale through private treaty.
“HF Group has put in place strategies to improve the quality of the lending book… the business is offering a number of restructuring packages to distressed borrowers, including but not limited to private treaty sales and negotiated settlements,” said HF in its annual report.
The bulk of the auctions outside Nairobi are in the Coast region, where the lender is seeking to flog 15 properties worth Sh394.2 million.
The most expensive property on sale in the Coast is a Sh70 million private residence with a main house and two cottages in Mtwapa, sitting on 6.99 acres.
There are four properties on sale in Central Kenya — Kipipiri, Imenti, ol Kalou and Gatundu — targeting to raise Sh63.45 million. In Eldoret, Nakuru and Kisumu, HF is seeking Sh69.7 million from the sale of seven properties.
In the sales for Nairobi and its environs, the lender is selling 54 properties – mainly standalone houses and apartments — with reserve prices ranging from Sh3.4 million to Sh300 million.
Mr Kibaara said many of the houses on the list have already been sold, or withdrawn from sale as per customer wishes (for the private treaty sales).
“The houses on sale currently are just over Sh1 billion in value… we are in the process of updating the current list and we will put it on our website in due course,” he said.
Overall, the real estate sector has seen its fortunes stumble in recent years, which has been reflected in a sharp rise in bad loans as developers struggle to shift units in an oversupplied market amid slow demand.
Non-performing loans attributable to the real estate sector have risen three-fold in the past five years, from Sh12.66 billion in 2014 to Sh43.5 billion as at September last year.