A British climate fund targeting investment in Kenya’s affordable housing will build homes for rent between Sh15,000 and Sh50,000.
The fund also plans to set up homes for sale for Kes 4.5 million as it targets construction of 10,000 climate friendly units.
The UK fund made the announcement that it has started operations after securing Kes 5.2 billion in financing last week during President Uhuru Kenyatta visit to the European nation.
UK Government’s International Climate Finance has committed Kes 4.4 billion (£30 million) and British financial sector development agency FSD Africa Investments (FSDAi) will put in Kes 740 million (£5 million).
The Fund plans to roll out 10,000 housing units for sale at an average price of Kes 4.5 million and rental spaces ranging between Kes 15,000 and Kes 50,000 a month.
Kenya has placed affordable housing as a top government priority with a goal of adding 500,000 homes in five years through state funding and partnership with private sector, attracting global players keen to meet growing demand.
“Today, UK Climate Investments and FSD Africa Investments confirmed a Sh5.2 billion (£35 million) funding commitment to a Kenyan green affordable housing venture,” Anne-Marie Chidzero, Chief Investment Officer of FSD Africa Investments said.
“This is the first close of the targeted Sh9 billion (£61 million), which has received 100 per cent uptake, enabling this locally managed fund to become operational as early as July 2021,” she said.
Kenya has been slow in delivering the half a billion houses during President Kenyatta’s second term and has allocated only Sh13.9 billion in the 2021/22 budget.
The Park Road project, whose construction started in April 2019, is the first low-cost housing development to be completed by the national government.
The government expects to deliver some 15,000 units in the Nairobi Metropolitan Area within the next three years.
The State has managed to collect Kes 536.5 million in deposits from the sale of its 1,370 low-cost houses on Park Road in Nairobi, which feature one, two- and three-bedroom units.
A report by real Estate firm, Broll, said the housing project has become attractive to investors given the tax incentives for developers such as tax rebates and infrastructure cost subsidies.
The government has scrapped stamp duty for first-time buyers; has promised provision of bulk infrastructure such as drainage and utilities; reduction of corporate tax from 30 per cent to 15 per cent for developers who build more than 100 affordable units; and exemption of Value Added Tax (VAT) on construction inputs.
“Average yields range between 7 per cent and 13 per cent, with government projects achieving the highest yields due to low or no land cost,” The report read.