Housing Finance has stamped its first joint venture with a Sh1.2 billion residential project in Riruta Satellite area in Nairobi’s outskirts.
The mortgage lender will chip in Sh186 million in the project, the equivalent of the value of the land, while the landowner, Benard Ndung’u, has availed the 5.4-acre plot where blocks of flats will be put up.
The project, christened Precious Gardens, will have 328 units in a mix of 1-3 bedrooms. It will be completed in two phases over 18 months beginning last month.
In joint ventures, landowners will contribute the land while the lender avails cash equity to finance construction. It intends to invest between 25 per cent and 60 per cent equity in joint ventures.
“This is a key strategy we embarked on two years ago to boost our involvement in supply of middle and lower-middle income housing. We have several other projects lined up for this year,” said managing director Frank Ireri at the site’s ground-breaking on Monday.
He said the lender is using part of the proceeds it raised from a Sh3 billion corporate bond issued last year to finance real estate developers, end-buyers and joint ventures.
The joint venture’s Special Purpose Vehicle has sourced funds – about Sh828 million – from a local bank to plug the deficit in project cost, according to Housing Finance’s general manager for project finance James Karanja, who could not name the lender for “competitive reasons”.
The offer price for off-plan sales has been pegged at Sh3.95 million for 1-bedroom units, Sh5.25 million for 2-bedroom units and Sh6.5 million for 3-bedroom units.
Ireri said the lender targets to develop 550 residential units in 2013 mainly through joint ventures. It already other partnerships in the mix at Kahawa and Embakasi areas.
He said this concept will help beat the challenges of high cost of land in urban areas and the complicated process of land acquisition that continue to hinder delivery of affordable housing.
“The process of acquiring virgin land for housing is still quite complicated and the government has to streamline it with urgency,” he said, adding that rural-urban migration has increased the demand-supply gap for housing in Nairobi.
The rising cost of building materials has also compounded the cost of construction, impacting negatively on housing affordability.
Housing Finance – which revived the Kenya Building Society, its subsidiary, after a 13-year dormancy – said it is targeting to build properties valued in the range of Sh2.5 million and Sh6 million through its own developments and similar joint ventures. The firm also plans to tap emerging opportunities in the 47 counties.