Housing Finance is among the financing partners in NSSF’s latest project involving the construction of 1,581 houses units in Embakasi, Nairobi. Photo/FILE
Workers’ provident fund NSSF has teamed up with mortgage finance companies to sell houses in a change of tack aimed at improving the retirement fund’s loan recovery rate and making allocation of homes to potential buyers transparent.
Mr Alex Kazongo, the managing trustee of the National Social Security Fund (NSSF), said the retirement fund had previously encountered difficulties selling houses under the tenant-purchase scheme, but under the new system buyers would deal directly with mortgage institutions.
Housing Finance, KCB, Standard Chartered, CFC Stanbic, Co-operative, I&M Bank and Ecobank were named as the financing partners in NSSF’s latest project involving the construction of 1,581 houses in Nyayo Estate Embakasi, Nairobi. Mr Kazongo said the houses, which are still under construction with a projected completion date of August 2012, will be sold exclusively under “cash or mortgage” terms.
This will be NSSF’s fourth and fifth construction phase of houses at Nyayo Estate, Embakasi.
The sale of houses built in previous phases was steeped in controversy after some buyers claimed they were not allocated transparently.
In the previous scheme, individuals were required to raise a 10 per cent deposit while payment of the balance was based upon proof of ability to repay in monthly instalments equal to what they would pay as monthly rent in a tenant purchase scheme run by NSSF.
The decision by NSSF to sell through the tenant-purchase scheme was said to be informed by Kenyans’ aversion to debt, but with the recent increased uptake of mortgage financing, NSSF seems to have reconsidered the position.
“It will definitely improve their cash flow, enabling them to engage in other income projects” said Eric Musau, an analyst at African Alliance Investment Bank.
The tenant purchase scheme constituted Sh4 billion (about five per cent) of the Sh80 billion portfolio held by the parastatal.
Inclusion of the financiers at the start of the projects will assure buyers that price adjustment after completion will not recur, as the asset value appreciation has already been factored in, given that financiers demand sales agreement that are legally enforceable so as to disburse funds.
In their last sale, NSSF adjusted the prices to be paid by those who had applied for consideration for the 674 units for sale the previous year upwards by between Sh250,000 and Sh550,000 per house, a move the trustee said was in tandem with the prevailing market rates.
All houses under the current phase are three-bedroom units with prices ranging between Sh6.1 million and Sh8.42 million.
In the last phase, the prices ranged between Sh4.4 million and Sh6.25 million showing the price inflation in the real estate sector.
The first 675 houses sold to the public in 2008 were snapped up in a day, indicating the high demand for housing amid tight supply.
But NSSF has been reducing its portfolio in real estate from 63 per cent in 2004 to 34.5 per cent in 2009 to re-align with the retirement benefit authority requirement of 30 per cent in order to lower illiquidity in its asset portfolio.
