NAIROBI, Kenya
Housing Finance’s Kshs 3 billion bond issue has been listed at the Nairobi Securities Exchange. Housing Finance recent bond issue raised over Kshs 5 billion against a target of KShs3 billion, representing a 78 percent oversubscription.
Housing Finance chairman Steve Mainda, said following the success of the bond issue, the firm has now re-introduced part fixed mortgages as it moves to grow its mortgage business. “The introduction of part fixed mortgages is expected to cushion customers from interest rate fluctuations during uncertain times,” said Mr. Mainda. He said the firm will explore a mix of affordable funding options for the business. He said introduction of viable long-term mortgage backed securities with tenures of over 20 years would go some way in improving the market.
HF has this year signed an international financing agreement for Kshs 2.2bn with the European Investment Bank (EIB) for funding eligible SMEs in the construction industry and funding of $ 10 million from Ghana International Bank. “Housing Finance is in talks with other financiers for funding lines for the business, which should help it reduce reliance on short-term deposits to fund its long-term business,” said Mr Mainda.
Speaking during the bell ringing ceremony to mark commencement in trading of the new bond the Nairobi Securities Exchange Chairman, Mr. Eddy Njoroge said: “Housing Finance has led the way in tapping long term funds from public corporate debt market for housing. We hope that you will also lead the market to issue mortgage backed securities, using your mortgage loan book as the underlying assets.”
Mr. Njoroge also urged the Central Bank of Kenya to facilitate the issuance of asset back securities, where financial institutions, particularly the commercial banks, can pool non mortgage assets such as auto loans, and even credit card receivables as the underlying assets.
CBK Governor Prof. Njuguna Ndung’u said the regulator is actively working on the development of a Primary Dealer network which would significantly improve liquidity in the government bond market. “The Primary Dealer network could potentially be a platform used for mortgage securities,” said Prof. Ndung’u.
The bond market is currently dominated by government securities, but there is an active corporate bond market which accounts for around 9 percent of issuance. Prof. Ndung’u said CBK will develop an over the counter trading (OTC) system which would further enhance market liquidity.
The mortgage financier is targeting the lower and middle income segments of the market where there is an acute housing shortage. The demand for housing in the country is estimated at over 200,000 units per annum with supply estimated at approximately 50,000 units. Demand is highest in the low to middle class. Proceeds from the bond issue will be used for provision of mortgage financing for existing and aspiring home owners and Involvement on the supply of residential middle and lower income.
The Capital Markets Authority (CMA) in 2010 approved the issue and listing of a seven-year Kshs 10 billion bond. Housing Finance raised Kshs7 billion in the first tranche in October 2010, which represented an oversubscription of 41% above the then target of Kshs 5 billion. The firm decided then to exercise the green-shoe option and took the entire Kshs7 billion. The offer for the second tranche of Housing Finance bond went on offer on 1st October at a fixed rate of 13%.
The money will be used for onward lending to clients and to increase Housing Finance participation in housing supply. About HF For over forty six years, Housing Finance has been “turning dreams into homes” for thousands of Kenyan families and housing developers. Mainly by providing easy access to mortgage finance and by enabling our clients to save money as they build, buy and own their homes. Housing Finance has managed to maintain substantial market share and remains the dominant industry leader based on mortgage loans value and number of mortgage customers.
