Shelter Afrique’s Sh2.5 bond debuts at bourse

September 20, 2011
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, NAIROBI, Kenya, Sep 20 – A Sh2.5 billion housing bond issued by pan-African housing and urban development financier Shelter Afrique, has been listed on the Nairobi Stock Exchange (NSE) to begin trading on Tuesday.

It is the first tranche of a Sh3 billion three-year medium term note (MTN) issue that will be used to develop private housing infrastructure for Kenya’s growing middle class.

Minister for Housing Soita Shitanda, who launched the bond, challenged developers to use cheaper materials to alleviate high housing costs, noting that the improvement of housing was a major concern to the government.

“For a long time, investment in housing sector has been minimal and sporadic. This is as a result of lack of an enabling environment for private sector participation in housing delivery process particularly for lower middle and low-income groups,” he noted.

Kenya still has low levels in urban home ownership estimated at just 16 percent, with the sector currently facing a deficit of 150,000 units per year.

Several factors have hindered the development in real estate sector including the high cost of finance; lofty building and construction materials costs; lack of serviced land; inappropriate building and construction technologies and stringent planning regulations among others.

“We are scaling up our operations in Kenya to meet the rising demand for houses especially for middle income earners. Through this process we aim to provide assistance to housing developers in Kenya and improve supply in the housing sector,” Shelter Afrique Managing Director Alasanne BÂ said, during the launch.

Shelter Afrique currently has10 residential development projects in Kenya worth Sh9.4 billion that will be financed in part by the proceeds of the bond, while 34 percent of the total project costs will be taken up by the housing financier.

NSE Chief Executive Peter Mwangi said the listing is a demonstration of Shelter Afrique’s confidence in the Kenyan market, having dealt with the exchange since 2000, when it issued a Sh350 million medium term floating rate note.

“We’ve had a deepening relationship with them (Shelter Afrique). They’ve come back to us each time with an increased amount that is testament to the fact that our markets are becoming deeper and more liquid and the preferred source of long-term capital for people who want to invest in infrastructure,” he said.

The three year housing bond’s floating rates will comprise 60 percent, while the remaining 40 percent will be fixed rates.

The final tranche of the Sh3 billion MTN issue is expected to be released into the market early next year.

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