KMRC to float Sh10.5bn bond to lower mortgage rate

Kenya aims to provide 500,000 new affordable housing units by the end of this year

In Summary
  • The state-owned mortgage financier is planning to issue the private bond in several tranches, starting with a Sh1.4 billion
  • At least three major private bonds have been floated in the country in past one year
National Housing Cooperation houses in Kilimani, Nairobi /JACK OWUOR
National Housing Cooperation houses in Kilimani, Nairobi /JACK OWUOR

Kenya Mortgage Refinance Company (KMRC) can now float Sh10.5 billion Medium-Term Note after clearance by the Capital Markets Authority’s (CMA).

The state-owned mortgage financier plans to issue the private bond in several tranches, starting with one for Sh1.4 billion which will be disbursed to participating primary mortgage lenders (PMLs), for onward lending to mortgagers.

This is the first time KMRC is issuing a Medium-Term Note Programme to raise long-term capital in its quest to reduce mortgage interest rates and lengthen repayment periods.

Affordable mortgage rates is likely to increased the number of Kenyans owning homes.

KMRC has previously exclusively relied on concessional loans from the World Bank and African Development Bank (AfDB), the continental Development Finance Institution (DFI), for capital.

“This is an important milestone for KMRC as it aims to blend and diversify its sources of funds,'' KMRC CEO Johnstone Oltetia said in a statement. 

He added that the firm is raising more long-term capital, thereby re-financing more home loans and making them affordable and accessible for Kenyans.

The MTN comes on the back of the Sh3.9 billion Medium Term Note programme for Urban Housing Renewal Development Limited approved by CMA in December 2021, whose proceeds will be used to support an affordable housing project in Nairobi.

According to CMA CEO Chief Wyckliffe Shamiah,  KMRC's bond is a major milestone that positions the capital markets as a source of funding to support productive economic activities such as the delivery of affordable housing, which is one of the pillars of the National Big Four Agenda.

''One of the constraints of the growth of housing in Kenya is the financing constraint with total mortgages in Kenya at under 30,000 as mortgages remain out of the reach of many Kenyans, while the houses units in the market are also relatively expensive,'' Shamiah said. 

He said there is  improved issuer and investor confidence in the bond market with the recent oversubscription of 245 per cent in the EABL medium-term notes listed at the Nairobi Securities Exchange (NSE) in November last year. 

CMA approved an issuance to raise Ksh11 billion, but applications were received for nearly Sh38 billion.

Other private bonds issued last year include the Centum Investments Company Plc Sh4 billion medium-term note, and the Sh8 billion multi-currency Family Bank medium-term note which recorded an oversubscription of 147 percent.

''The oversubscription of the EABL and Family Bank corporate bond issues by 245 percent and 147 percent, respectively, indicates enhanced investor confidence and growing liquidity in the market,''Shamiah said.

KMRC was established two years ago to support the Affordable Housing Pillar of the Government’s Big Four Agenda. It received an operational license from the Central Bank of Kenya (CBK) on September 18, 2020.

Kenya aims to provide 500,000 new affordable housing units by the end of this year as one of President Uhuru Kenyatta’s top four priorities.

The country has an estimated 200,000 annual shortfall, which is expected to rise by 100,000 every year. 

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