HF upbeat about 2012 prospects

January 23, 2012
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, NAIROBI, Kenya, Jan 23 – Housing Finance is trudging ahead in the volatile housing market with various development projects lined up for the year.

Despite reservations by local developers, who have had to shelve projects due to high construction costs, Housing Finance (HF) Managing Director Frank Ireri said the economic climate is no reason to call it quits.

He added that the current shocks being felt in the market are just a bump in the long road ahead for housing, expressing optimism in a revived market hinged on peaceful elections and a successful Constitution implementation process this year.

“Once we go through that period I see Kenya taking off, and we have to be positioned with sufficient supply in the market to meet what is going to be increased demand,” he said.

By cushioning their customers with a 16.5 percent rate, Ireri added that none of them have stalled their development plans with hopes that the blip in the market will subside by first quarter of next year.

HF currently has three ongoing projects in the Sh8 million range and below.

Ireri said the financier is at an advanced stage in its plans to launch long term financing that will be facilitated by external sources, with the first tranche expected in the second quarter of 2012.

With fluctuations in interest rates a virtual certainty, the long-term funding will support HF’s mortgage business which in turn will shield it from such volatilities.

Ireri predicted easing in interest rates by June which he assured would be passed down to their existing clients.

“What we’re telling clients is any reduction in rates in the market we’ll pass on automatically. When we get our own long term funding we’ll then be able to come up with new products at more affordable rates,” he said.

Following the move by the Monetary Policy Committee (MPC) to maintain the Central Bank Rate (CBR) at 18 percent, downward movements seen in the 91 day Treasury Bill (T-Bill) could be the first sign of easing interest rates.

At last week’s auction the weighted average rate of accepted bids for the 91 day T-Bill slid by three base points to stand at 20.769 percent, marking the first time the rate has declined since June 2011.

Still, the MPC’s decision to maintain its benchmark lending rate at 18 percent has not improved appetite of prospect buyers in taking up home loans, who have chosen to take a wait-and-see approach.

It is anticipated that increased demand for government paper due to risk aversion and expected inflow of $600 million in government borrowings from international banks, will likely curtail further rise in rates.

In terms of foreclosures Ireri revealed that the financier has not experienced any impact. This, he added, has been in part because of HF’s decision to increase interest rates on existing loans by 2.5 percent.

“On a case by case basis, we have revised the remaining term of the loan to help fit into one’s income, but we have not had too many requests for that,” he said.

HF plans to launch another fixed mortgage in the second or third quarter to give investors and buyers the opportunity to plan and budget payments over a specific period of time.

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