Housing Finance Group, Kenya’s oldest mortgage lender, plans to empty its entire home-loans book before building it up again on the backbone of the government’s affordable housing agenda which is expected to deliver 500,000 homes over the next five years.

HF CEO Sam Waweru said the Kenya Mortgage Refinance Company, which the government is creating, will provide funding to lenders and allow companies like HF Group to sell existing loans to the new entity to free up capital.

“We can release, off the top of my head, about 50 billion shillings from our own book,” he said. “That would mean we can lend another 50 billion shillings to the economy immediately. We’ll bundle together the mortgages we have written over the years.”

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He added that HF Group plans to provide housing loans of as low as 2.5 million shillings for about 200 new housing units over the next year. Low-cost housing is one of the pillars underlying the current government’s Big Four Agenda and the government has already set the ball rolling by offering tax relief and stamp-duty exemptions for first-time buyers.

HF Group’s loan-book growth slowed by 9 per cent in 2017 as the limits on interest rate charges took hold, elections slowed down activity and the failure of three lenders a year earlier caused credit demand to slow, according to the company’s annual report.

HF Group is helping the government set up Kenya Mortgage Refinance Company (KMRC) by the end of the year, Mr Waweru said. The state will inject 1.5 billion shillings into the company in exchange for a 20 per cent stake, while the remainder will be owned by commercial banks, credit unions and development finance institutions. The World Bank will provide US$160 million in financing to KMRC, which will issue bonds to investors to fund its lending.

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Mr Waweru said the establishment of KMRC should set the stage for mortgage-backed securities, helping to ease the housing shortage. The World Bank estimates that 50,000 homes are built a year against an estimated annual demand of 200,000 houses in a country where 61 per cent of urban households live in slums.

“The benefits will start accruing very early in 2019 and into the future.” Mr Waweru said. “The market has been ready for mortgage-backed securities,” he added.

Source; Bloomberg