HF CEO Robert KIbaara

Listed mortgage lender is counting on diversification to reduce over-reliance on its real estate position. According to the company’s annual report published in April this year, the business has diversified into new segments including diaspora banking, SME banking, institutional banking and personal banking in a bid to reduce concentration in real estate, which is capital intensive and requires long-term funding.

The report notes that with the new segments, the business is able to lower the cost of funding whilst serving customers holistic banking needs.

In 2018, the Group completed and handed over to buyers the first phase of Komarock Heights consisting of 480 apartments. The Group also completed the development of 248 apartments at Richland Pointe along Kamiti Road, which culminated in an official launch ceremony in partnership with Shelter Afrique, who financed the project to the tune of KShs. 700 million.

Moving forward HF intends to concentrate its efforts on mortgage financing to end buyers, the report says. According to the lender, the Big Four Agenda for affordable housing presents a great opportunity for the business to play an active role in financing of low-cost housing ownership.

The Group realized a loss before tax of KShs. 642.744 million in 2018, compared to a profit of KShs. 311.624 million reported during a similar period in 2017.

HF’s performance also suffered drawbacks occasioned by non-performing loans are mostly as a result of developers being unable to service their loan facilities with the bank. This was attributed to inability to realize projected sales revenue, resulting from the slowdown in the real estate sector.

A September 2018 report by the Kenya National Bureau of Statistics indicates that the property sector posted a growth of 5.8 per cent– its slowest rate since the 5.4 per cent recorded in the last quarter of 2014. This subdued demand for property due to the credit crunch, has affected many developers’ ability to repay their bank loans.

HF’s NPL Management Strategy entails working with these developers on joint marketing initiatives to increase visibility and take rate for their properties. One such initiative is the recently launched property sales campaign dubbed “Shika Nyumba na HF” offering 100 percent financing and reduced prices by up to 30%. In addition, the business is offering a number of restructuring packages to distressed borrowers, including but not limited to Private Treaty Sales and Negotiated Settlements.

The Group’s real estate pipeline going forward is packed with Clay City consisting of 160 units set for completion by end of 2019 while Precious Heights Phase 2 is due for completion in 2020. To accelerate sale of these properties and those of struggling developers financed by HF, the company has initiated the Property Sales campaign with up to 30 percent discounts on 700 properties.

In financial year 2018, the Group’s liquidity increased to 21.00% up from 20.78% in a similar period in 2017 while total assets declined to KShs. 61 billion, down from KShs. 68 billion during a similar period in 2017 mainly due to the slowdown in lending.

HF is also one of the few players that have invested in the Kenya Mortgage Refinance Company (KMRC), which is set to unlock funds for lending to developers and buyers.

RelatedHF Group sells 248 housing units at 30 per cent discount