Housing Finance of Kenya Considers a Second Bond Issue
Housing Finance Ltd., Kenya’s only publicly traded mortgage company, plans to issue 3 billion shillings ($29 million) of debt when the “market stabilizes,” Managing Director Frank Ireri said.
The company sold 7 billion shillings of 8.5 percent seven- year bonds last September. Borrowing costs in Kenya surged as much as 20 percent in August as the central bank restricted money supply to lenders. Inflation soared to 16.7 percent in August, more than triple the 5 percent target, as the worst drought in six decades damaged crops and the shilling slid 22 percent against the dollar this year, making it the world’s worst performer.
“If we tried to go out to the market today they will probably ask for 15 percent,” Ireri told reporters today in Nairobi, the capital. The issuance would “insulate the housing finance system from market fluctuations associated with short- term funds.”
Housing Finance will increase funding from cheaper sources by introducing current accounts in the first quarter of 2012, Ireri said. The facility is expected to boost deposits at the Nairobi-based lender by 20 percent over two years, Ireri said.
Urban areas in Kenya need 150,000 housing units a year, compared with the 35,000 being added, resulting in overcrowding and informal settlements, according to Housing Finance.
Before the end of this year, Housing Finance will begin construction of houses in three residential estates in Nairobi, Ireri said. He declined to give the number of units and cost of the projects because the company is still awaiting approvals from government agencies.
Over the past 30 months, the company has approved customers loans worth 7 billion shillings, Ireri said.
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