NAIROBI, Kenya, Mar 3 – Mortgage lender Housing Finance (HF) has asked the government to abolish some sections of the country’s building code to enable it construct affordable housing units for the middle and low income segments.
HF Managing Director Frank Ireri on Tuesday said that the current code requires developers to use outdated technology and procedures, which add on to the construction costs and are then passed on to the end consumer.
“The reasons for the relatively high cost of housing in this market have got to do with the expertise that we employ in this country. We are in discussions with the Housing Ministry to have some of these codes repealed to allow the use of modern technologies,” he told an investor briefing.
He added that these technologies are cheaper and save on time and interest costs on developments, as they are quicker to put up.
The government has promised a new (building) code by the first quarter of this year but it is not clear whether these changes will be included.
Mr Ireri reiterated that they were committed to developing houses that would meet the deficit in the country, which is estimated to be about 150,000 units per year.
He blamed the short supply in affordable housing on the developers’ concentration on the high end market and the lack of available land.
“Our focus is unlocking the (potential) that exists in the large tracks of lands within a radius of 70 kilometres of Nairobi. We will work with both public and private entities and put up housing solutions there,” he disclosed.
This, he added, called for the provision of infrastructure and other public amenities in order to come up with products for the masses.
In the same breath, Mr Ireri said that they plan to revive its (development) subsidiary, the Kenya Building Society (KSB), to play a pivotal role in HF’s medium and long term plan to provide mass housing solutions.
He confirmed reports that the mortgage financier would cede a certain shareholding in KBS in order to raise capital for developing both residential and commercial buildings.
“We want to attract equity partners to come and join us. We have also tied up various potential partners in terms of land ownership and professionals so that we can come up with products, which we can start rolling out,” he added.
At the same time, Mr Ireri sought to allay fears that the impact of the financial crisis which has its origin from the bursting of the housing bubble in the US would adversely affect the local market.
“These are two different markets in the way we lend. In Kenya, we have a shortage of people who want to own homes as opposed to people who want to invest in mortgage backed securities, who put their money on paper as opposed to actual properties,” he explained.
The MD spoke while releasing HF’s financial results for the year ended December 2008 where they recorded an 85.5 percent rise in after tax profits from Sh73.5 million in 2007 to Sh136.4 million.
He attributed the performance to the growth in the interest income, which went up from Sh858 million to Sh1.08 billion.
Their core mortgage business had also shown impressive growth, which has enhanced their drive to serve the different segments of the market.
He was optimistic that although 2008 was a challenging year because the economy continued to suffer various shocks such as the financial crisis and high inflationary pressures, the outlook for 2009 would be favourable.
“We are banking on an easing of the inflation as well as the continuation of broad interest rates,” he said.