NAIROBI, Kenya, Aug 1 – All it took was a few, deft strokes of the pen on paper, and a brief ceremony of great significance for African real estate developers and housing finance institutions was formalised in the form of a Sh2.9 billion financial package between the main principles at the African Development Bank (AfDB), Shelter-Afrique and the Embassy of Japan.
The agreements further strengthen Shelter Afrique’s balance sheet to effectively finance the housing sector targeting the middle income group in the member countries.
It is also a catalyst for additional financial resources from the capital markets and African commercial banks as well as some development finance institutions.
With an estimated population of 900 million, Africa faces enormous urban and housing development challenges requiring massive investments in economic and infrastructure services. However, the provision of affordable and sustainable housing finance to support economic growth and recovery, as well as to counter the effects of slum expansion, is a critical factor in Africa’s economic growth, poverty reduction and realisation of the UN Millennium Development Goals.
According to Bishop Margaret Wanjiru, Kenya’s Assistant Minister of Housing, the country’s housing need alone is worth Sh300 billion with a demand of 150,000 housing units per year.
“The housing market is ripe in Kenya and therefore a good investment with a ready market,” she said. “But there must be someone ready to invest and build the units.”
These sentiments were echoed by Ms Domina Buzingo, AfDB’s Regional Representative, who acknowledged Shelter Afrique’s significant contribution towards the provision of sustainable housing in Africa.
“Today’s ceremony marks another important step in this partnership and demonstrates AfDB’s and Shelter Afrique’s commitment to improve living conditions for African people,” she added.
Long-term resources will be provided through the line of credit for on-lending to private real estate developers and housing institutions. Ms Buzingo clarified that a significant portion of the funds would be devoted to the development of housing schemes that address the needs of low-income households. AfDB contributes to the economic and social progress of its 53 regional member countries.
The Managing Director of Shelter Afrique, Mr Alassane Bâ noted that in market terms Kenya was one of the flagships for Shelter Afrique providing a favourable environment for housing development and mortgage finance. With a total of 80 development finance projects worth USD 80 million, Kenya is one of four large borrowers along with Nigeria, Senegal and Mali.
“Our loans have gone towards the provision of housing for the middle income bracket and many urban development projects,” he added.
Shelter Afrique, is a regional finance and development institution involved in housing finance and related infrastructure development in Africa and is headquartered in Nairobi. It has projects in 32 African countries.
The financial package consists of a USD 30 million line of credit, USD 7.5 million equity investment and USD 0.95 million technical assistance from the Fund for African Private Sector Assistance (FAPA). The latter is a trust fund for private sector development funded by the government of Japan and will be channeled into product diversification and development.
According to Japan’s Ambassador to Kenya, Shigeo Iwatani, his county is keen to see development finance loans taken up by private sector corporations and smaller housing developers: “Japan has already contributed USD 300 million to the African Development Bank and other institutions to create an enabling business environment, the development of micro to medium scale businesses and the promotion of trade.”