Kenyan Housing Corporation eyes bourse

July 14, 2010

, NAIROBI, Kenya, Jul 14 – The National Housing Corporation (NHC) has enlisted Stanbic and Kenya Commercial banks to offer expertise as it seeks to float a Sh5 billion bond at the Nairobi Stock Exchange.

Managing Director James Ruitha said that the banks have been taking the corporation through a due diligence checklist. He explained that the corporation would have to ensure that the coupon rate was affordable before NHC gets the go ahead.

“That’s where the issue of either you have a credit enhancement or you have a government guarantee for the bond. That way you will be addressing the issue of affordability of the coupon value. The bond approval that we got was on condition that the bond is not government guaranteed; meaning there will be need to look at our financials,” he said.

Mr Ruitha further said that the NHC had asked the Treasury to rethink the condition placed by government on providing collateral for the bond.

“We have also gone ahead and requested the government to reconsider its condition of no-government guarantee and we have already written to the Treasury,” he said.

He also explained that the NHC would look at the cost of marking up the floatation in the event that the government refused to provide the guarantee.

“And that could be as much as four or five points which will be a significant amount if you look at volumes in terms of finance,” he said.

He also said that Finance Permanent Secretary Joseph Kinyua had promised that Treasury would re-look the request by NHC, “because it goes to the core of affordability so that if we are able to get a relatively lower cost then we put the money into a project, the eventual development cost of the scheme is also lowered.”

The Managing Director further explained that the housing corporation was looking into alternative ways of raising revenue by ensuring that all its debtors cleared their dues.

“For example in Kileleshwa we got about three and a half acres of land after a debt swap with the Kenya Railways because they were unable to pay us.  They gave us the land and we went to the market to see if we could bring up houses,” he said.

He however added that NHC had to raise money to develop the land acquired through the debt swap, “We needed about Sh800 million but since we didn’t have the money we got a developer who injected 80 percent of the total cost in to the project and we gave 20. Three months after the physical completion of the project, we were able to raise the money given by the developer.”

He also said that the corporation was in the process of reclaiming debts owed to it by local authorities throughout the country.

Central bank of Kenya Governor Prof Njunguna Ndungu in May called on housing finance institutions to trade their bonds to help raise revenue which would in turn help meet the country’s housing demand.


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