CHEAP HOUSING

Green bonds can bridge affordable housing gap- Shelter Afrique

Kenya has been named among African countries ripe for green financing to develop cheap homes

In Summary

•Kenya’s capital market has the capacity to support green bonds issues, not only for the country but also for the greater East African region

•The affordable housing pillar is expected to deliver one million housing units in less than five years to bridge the housing gap estimated at 1.8 million units

Shelter Afrique Chief Executive Officer Andrew Chimphondah
Shelter Afrique Chief Executive Officer Andrew Chimphondah
Image: ENOS TECHE

Kenya should leverage on green financing to fund its affordable housing pillar under the Big Four agenda.

According to pan African housing development financier Shelter Afrique Kenya has been named among African countries ripe for green financing to develop cheap homes.

“There is a market for green financing in Kenya, South Africa, and Nigeria since these countries have well-established capital markets,” Shelter Afrique chief executive Andrew Chimphondah said.

He added that Kenya’s capital market has the capacity to support green bonds issues, not only for the country but also for the greater East African region.

“However, most capital markets across Africa need to be strengthened,” he said.

Under President Uhuru Kenyatta’s Big Four Agenda, the affordable housing pillar is expected to deliver one million housing units in less than five years to bridge the housing gap estimated at 1.8 million units.

With the government having pledged to offer Sh40 billion worth of monetary and legislative incentives to the private sector to attract partnerships to drive the agenda, more needs to be done in terms of financing to meet the overall cost of the project estimated at Sh2.2 trillion.

A total of 800,000 cheap homes are expected to be built under the public private partnership model and 200,000 will be put up under a social scheme.

In August the Capital Markets Authority (CMA) approved Kenya's first green bond to raise Sh5 billion to put up students' hostels.

The green bond issued by Nairobi-based property developer Acorn Holdings for the construction of environmentally friendly student accommodation managed to raise Sh4.3 billion shillings (86 per cent) of the initial offer.

With the Africa’s housing industry requiring at least Sh250 billion ($2.5 billion) in new investment annually for a meaningful impact, Shelter Afrique has decided to add green bonds to its funding mix.

“We will engage with some of our partners to access this funding for affordable housing in Africa in the coming year,” Shimphondah said.

A 2018 report by the International Finance Corporation dubbed ‘Climate Investment Opportunities in Cities’ estimates a cumulative climate investment opportunity of $29.4 trillion across six key sectors in emerging market cities between now and 2030.

The largest share of the opportunity is in green buildings $24.7 trillion, covering new constructions and retrofits, as cities race to accommodate their growing populations

Research from Shelter Afrique Centre of Excellence (CoE) also indicates that the continent requires more than $1.4 trillion in funding to be able to effectively address the growing housing crisis where innovative funding options like green bonds come in handy.