Phase 1 of Affordable Homes Ready

Staff Writer | Jan 20, 2020

During the week, China State Construction handed over the 228 2-bedroom units of the first phase of Park Road affordable housing project in Ngara to the Kenyan National Government. The 1,370-unit project sits on a 7.9-acre parcel of land in Ngara, Nairobi, with Phase 2 expected to be completed by June 2020. Once complete, the project will comprise of 30 square-metre 1-bed, 40 square-metre 2-bed and 60 square-metre 3-bed social housing units selling at Kshs 1.5 million, Kshs 2.0 miilion and Kshs 3.6 million, respectively, which translates to Kshs 53,056 per square-metre, in addition to 60 square-metre 2-bed and 80 square-metre 3-bed affordable housing units selling at Kshs 3.0 million and 4.0 million, respectively, which translates to Kshs 50,000 per square metre.

According to the dailies, approximately 300 homeowners have so far paid the mandatory 12.5% deposit and are awaiting allocation which will be done through the running of a lottery (timelines not disclosed). In December 2019, the government published guidelines that would be used in allocating residential units at the Park Road affordable housing project in Ngara.

The units will be allocated through the Boma Yangu Portal upon paying of 12.5% of the house value as a deposit with the main modes of purchase as follows;

Outright Sale – requires 12.5% of the house value as a deposit with the balance paid within 90-days,
Mortgage Loan- financed under the Civil Servants mortgage scheme or partner banks, and,
Tenant Purchase Scheme (TPS) - 12.5% of the house value as a deposit with monthly payments at an interest of 7.0% p.a for a period of 25-years. However in our view, the rate may not be sustainable as it may result in a high cost of debt for the KMRC facility as investors of the mortgage-backed bonds are likely to demand a relatively high rental yield of approximately 13.5%, assuming a 1.0%-point margin above the minimum of the risk-free rate for a 15-year bond, which currently stands at 12.5%, yet KMRC’s target is providing mortgages at 9.0% interest.