The Nairobi based Pan African housing and urban development financier, Shelter Afrique, issued a Ksh3.5 billion bond through the Nairobi Securities Exchange in September, 2013.
The five year medium term note issue received Ksh5 billion, representing a 43% oversubscription. With a greenshoe option of up to Ksh1.5 billion, Shelter Afrique accepted the total amount received of Ksh5 billion.
The issue, which concluded on September 20th, is the first tranche of a Ksh8 billion medium term note, which will be used to fund low cost urban housing projects across the country.
The Ksh3.5 billion bond is listed on the Nairobi Securities Exchange, and started trading on Thursday 24 October, 2013. The bell ring ceremony for the start of the bond trading was presided over by Ms Mariamu el Maawy, Principal Secretary, Ministry of Lands, Housing and Urban Development.
While launching the bond trading, the Cabinet Secretary challenged developers to use cheaper house construction materials to make houses affordable to majority of Kenyans, noting that the improvement of housing provision was a major concern to the Government.
“For a long time, the housing sector has not attracted adequate investment to meet the ever increasing demand. This has been due to various constraints in the housing development and delivery process, particularly for the lower middle and low-income groups. These constraints include high cost of finance; lack of adequate serviced land; high cost of building and construction materials; inappropriate building and construction technologies; limited research on low cost building materials and construction technologies; and high cost of infrastructure,” said Ms Maawy.
Kenya has a Low-level urban home ownership estimated at only 16 percent, with expansive slums and informal settlements. It is estimated that out of a total 150,000 housing units required annually in urban areas, only 35,000 units are produced.
The Principal Secretary said the Government has prepared a long term strategic plan to help address these bottlenecks hindering development, access to affordable and adequate housing through enhancement of access to affordable finance for developers and buyers; and through pursuit of targeted reforms to unlock the potential of the housing sector.
“It’s the Government’s intention to facilitate the production of 250,000 housing units annually through a mixture of initiatives in order to fill the huge housing gap in the country,” the Principal Secretary said. She added that, provision of adequate housing is an important social and economic investment.
She also noted that her Ministry was helping county towns in physical planning, cleaning up land registries through digitization, enhancing county governments’ capacity to provide serviced land and development of low-cost housing, and cleaning up the building and construction industry in Kenya.
Shelter Afrique Managing Director Alassane BÂ said projects to benefit from the money raised through the bond had already been identified; adding that the company was keen on working closely with the Government in meeting the country’s housing needs.
‘We shall be supporting low cost housing projects to cater for the rising demand for housing, especially at the lower end of the pyramid. Already, we are working with about 2,000 families through the Makau Mashinani project to help them improve their homes. With the Government of Kenya and UN HABITAT, we are about to launch a new scheme for 2,500 slum dwellers in Mavoko,” He added.
Fixed rate investors took 85 per cent of the issue, while floating rate subscribers snapped the 15 per cent balance of the note. The fixed rate notes were issued at an interest rate of 12.75%, while the floating rate notes were priced at 150 basis points above the 182-day Treasury Bills.
The Nairobi Securities Exchange (NSE) Chairman Mr. Eddy Njoroge stated,” Since coming to market each subsequent debt issue by Shelter Afrique has increased in size, clearly demonstrating our deepening relationship and the confidence that Shelter Afrique has in our market as one that is well regulated, deep and liquid.”
Naval Sood, CfC Stanbic Bank Executive Head Capital Market & Advisory for East Africa said the ability of Shelter Afrique to continue to tap into the debt capital markets to support the growing demand from project developers for long term credit was a testament not only to investors’ appetite for good quality credit but also rising demand for housing which remains unmet and which Shelter Afrique had been working to bridge by providing affordable financing.
"In each issue the reception by investors has been overwhelming and i wish to take this opportunity to thank investors who have continued to provide long term funding to Shelter Afrique. This trend needs to be extended to other sectors, particularly power, infrastructure, oil and gas, which will require long term financing," Mr. Sood said.
The Nairobi-based Shelter-Afrique is owned by 44 African governments, the African Development Bank and the African Reinsurance Corporation.
