500,000 Affordable

Homes Program
Presentation to East Africa Venture
Capital Association
June 2018
 INTRODUCTION

Background

 The process of conceptualizing the program

began in August 2017

 Several meetings have been held with key

stakeholders
 Housing Cooperatives on 27 September 2017
 KPDA in March 2018
 Financial Institutions and Insurance Companies
in April 2018
 Pension scheme managers in April 2018
 County Governments in April 2018 (Devolution
Conference)
 Relevant Government Ministries and
Departments etc.

 Consequently we have been adjusting the

development framework

Jun-18 CONFIDENTIAL 2
 INTRODUCTION

Affordable housing program

To enhance program segmentation we have defined four levels of housing types with only three (3) being the focus of the program

Middle to High Income Income Range: KES 100,000 +

▪ Share of Formally Employed: 2.85%

▪ Private Sector will meet this demand

Mortgage Gap
Income Range: KES 50,000 – KES 99,999

▪ Share of Formally Employed: 22.62%

Low cost
Income Range: KES 15,000 – KES 49,999

▪ Share of Formally Employed: 71.82%%

Social
Income Range: KES 0 – KES 14,999

▪ Share of Formally Employed: 2.62%

Jun-18 CONFIDENTIAL 3
 INTRODUCTION

Affordable housing program

Delivery of the 500,000 homes programme will be defined by supply, demand and an enabling environment

Ensuring that the houses are built based on a proven demand master plan and mega city approach (along an identified
segmentation) , mixed use developments with provision of social infrastructure, affordable developer financing,
and in the right economic and political nodes (achieving equity). Maximise use of private-sector financing with
government support on land, bulk infrastructure and other incentives.

Supply

Critical interventions are

made to ensure Provide a mix of long term
affordability (lowering Tenant Purchase
cost of build and Schemes (TPS) and
ownership of homes). affordable Mortgages.
Includes lowering cost of Need to set up a user
inputs (scale contracts), verification system
tax breaks e.g. zero ensuring houses built get
rating stamp duty for Demand to qualifying Mwananchi..
Enablers
first time home owners

Jun-18 CONFIDENTIAL 4
 INTRODUCTION

Achievements to date

We are crystallizing the development framework and engaging stakeholders

The Kenya Mortgage Refinancing Company has been registered and currently the regulations
are being drafted. It will be launched in February 2019

Discussions with the National Treasury are ongoing on the establishment of a National
Housing Development Fund to address supply

Several sites have been identified for the flagship projects (Park Road, Starehe, Shauri Moyo
and Mavoko) and lease documents are ready.

We are working with ICTA to develop a housing Portal where people register to buy houses

We are evaluating building materials and technology providers for a housing building materials
and technologies exhibition( Coops can benefit from the exhibition)

We have signed MOUs with 8 County Govts for development of at least 2000 housing units in
each county and are still pursuing the other Counties

The review of the Sectional Properties Act is now complete and awaiting tabling in Parliament

Jun-18 CONFIDENTIAL 5
PROJECT PIPELINE
 AFFORDABLE HOUSING PROGRAM

Project pipeline
FY2017/2018 FY2018/2019 FY2019/2020 FY2020/2021 FY2021/2022

Lot 5
Master planner to support with identification of
locations for the funnel projects and development of
Lot 4
implementation schedule

Lot 3
▪ Mombasa 2 (30,000)
Lot 2 ▪ Nakuru 2 (30,000) ▪ Cooperatives 5 (20,000)
Lot 1 ▪ Kisumu 2 (30,000) ▪ Private Developers 5
▪ NSSF Land Mavoko (50,000)
▪ Nakuru 1 (30,000)
▪ Mavoko (12,500) (20,000)
▪ ▪ Kisumu 1 (30,000)
▪
▪ Park road (1,800) Portlands Athi River 1 (50,000) Cooperatives 4 ▪ Civil Servants 5
▪ ▪ Eldoret 2 (30,000)
▪ Makongeni (20,000) Mombasa 1 (50,000) (20,000) (10,000)
▪ Muguga Green (900) ▪ Eldoret 1 (30,000)
▪ Portlands Athi River 2 (50,000) ▪ Private Developers 4 ▪ Police 5 (10,000)
▪ Shauri Moyo (5,300) ▪ Cooperatives 1 (20,000)
▪ Cooperatives 2 (20,000) (20,000) ▪ Redevelopment of
▪ Starehe (3,500) ▪ Private Developers 3 (20,000) ▪ Civil Servants 4
▪ ▪ Private developers 2 (20,000) Nairobi Old Estates 4
Mavoko (5,500)
▪ ▪ Civil Servants 3 (10,000) (10,000) (20,000)
▪ Social housing (15,000) Civil Servants 2 (10,000)
▪ Police 3 (10,000) ▪ Police 4 (10,000)
▪ Counties (48,000) ▪ Police 2 (10,000)
▪ ▪ Redevelopment of Nairobi Old ▪ Redevelopment of
Nairobi County (67,800) ▪ Nairobi Regeneration (20,000)
Estates 2 (20,000) Nairobi Old Estates 3
▪ Other Counties (50,000)
▪ Counties (50,000) (20,000)
▪ Counties (50,000)

Jun-18 CONFIDENTIAL 7
 AFFORDABLE HOUSING PROGRAM

Project pipeline – Lot 1 projects

Lot 1 projects are further grouped into four categories representing a total development program of 167,640 units

Lot 1A: Lot 1C:

Flagship Projects Counties and
Lot 1B: Towns Lot 1D:
Flagship Social Nairobi County
Housing Projects
Projects

 Bahati
 Park Road  Transitional housing  22 Counties and Towns
 Maringo
 Muguga Green  Kibera B C, D  8 signed counties
 Ziwani
 Starehe A & B  Mariguini  14 counties in advanced
 Jericho
 Shauri Moyo A, B, C, D  Kiambiu negotiations
 Lumumba
 Makongeni
 Gorofani
 Mavoko
 Bondeni
 Shauri Moyo

Total Units: 36,840 Total Units: 15,000 Total Units: 48,000 Total Units: 67,800

Jun-18 CONFIDENTIAL 8
 PROJECT PIPELINE

Lot 1 details – National Government Initiatives

Lot 1B: Flagship social housing
Lot 1A: Flagship projects Lot 1C: County projects
projects
These projects are intended to build These projects are intended to improve These projects are based on MoUs signed with Counties which will receive support from
investor confidence and create informal settlements and slum upgrading. National Government on the development of infrastructure for land that will be made available
momentum for the program. These for housing developments for 2,000 units per year. Signed counties have identified land and
projects are at advanced stages of master are awaiting master planning for urban centers. Counties in advanced negotiations are
planning and urban designing. Park Road reviewing the agreement while identifying suitable land.
will break ground in July 2018.

Area No. of units Area No. of units Signed Counties No. of units Advanced Counties No. of units
1 Park Road 1,640 1 Kibera 4,300 1 Kiambu 6,000 1 Kitui 2,000
2 Makongeni 20,000 2 Kiambiu 2,700 2 Homa Bay 2,000 2 Makueni 2,000

3 Mavoko 5,500 3 Mariguini 4,000 3 Nyandarua 2,000 3 Taita Taveta 2,000

4 Shauri Moyo 5,300 4 Transitional housing 4,000 4 Meru 2,000 4 Bungoma 2,000

5 Starehe 3,500 TOTAL 15,000 5 Nyeri 2,000 5 Murang’a 2,000

6 Muguga Green 900 6 Tharaka Nithi 2,000 6 Laikipia 2,000

TOTAL 36,840 7 Uasin Gishu 2,000 7 Narok 2,000

8 West Pokot 2,000 8 Kirinyaga 2,000
9 Embu 2,000
10 Kisumu 2,000
11 Kakamega 2,000
12 Trans Nzoia 2,000
13 Mandera 2,000
14 Isiolo 2,000
TOTAL 20,000 TOTAL 28,000
Jun-18
 PROJECT PIPELINE

Lot 1 details – Nairobi County Government Initiatives

Lot 1D: Nairobi county projects

These projects initiated in Nairobi County Government using county land and
represent primarily proposed re-development of county estates.

Area No. of units

1 Bahati 14,000
2 Maringo 13,400
3 Ziwani 5,100
4 Jericho 14,500
5 Lumumba 10,000
6 Gorofani 840
7 Bondeni 960
8 Shauri Moyo 9,000
TOTAL 67,800

Jun-18 CONFIDENTIAL 10
 PROJECT PIPELINE

Rural housing
One of the major challenges of housing in rural areas is the quality of building materials. We have constructed 92 appropriate building technology
(ABT) centres across the country to promote use of local materials in building construction.

Research and Training Region specific solutions Matofali Machine Funding

 Train youth, women, and  Improving fire resistance on  Developed with Numerical  Funding for rural housing to
children in use of building makuti roofing and use of Machining Complex continue from NHC
materials coral stones in coast region  Used for manufacture of  Offering funding at
 Conduct research on  Modernizing roofing in stabilized soil blocks competitive interest rates of
improving local materials for Masai land for water  Improves walling 13%
sustainable construction harvesting while maintaining construction
 Modernizing construction cultural design
 Reduces construction cost
practices while preserving  Discouraging use of burning by 30%
cultural values bricks in western region
which deplete our forests  Machines to be distributed
to ABT centers

Jun-18 CONFIDENTIAL 11
 PROJECT PIPELINE

Apartment typologies
Studio Unit One Bedroom Unit
GFA: 20 sqm GFA: 30 sqm

Jun-18 CONFIDENTIAL 12
 AFFORDABLE HOUSING PROGRAM

Apartment typologies
Two Bedroom Unit Three Bedroom Unit
GFA: 40 sqm GFA: 60 sqm

Jun-18 CONFIDENTIAL 13
FINANCING
FRAMEWORK
OVERVIEW
 FINANCING FRAMEWORK

Overview of the financing framework

Principle Description

National Housing Development  The National Housing Development Fund is the bulk housing aggregator and off-taker. Undertaking for off-
Fund (NHDF) as an aggregator take will be provided by the NHDF
 The online housing demand portal will mitigate developer market risk, which would significantly boost the
supply of housing units at scale and lower developer financing costs
Housing purchase  The sale of homes by the National Housing Development Fund to buyers will take three forms: a tenant
options/developer exit purchase scheme, cash and mortgage buyers.

Bulk housing off-take  Through the NHDF, pension funds and institutional investors will mobilize long term local and
international pension funds and institutional financing for bulk off-take of houses and/or investment in issued
securities.

Off-shore lending for developer  Sizable construction finance from offshore lenders for onward lending to project developers will be mobilized
finance

Role of local banks  Local banks will maximize their development, home loan lending, construction finance and custodial
services businesses and capabilities in the delivery of affordable housing at scale.

Leverage limited government  The programme will leverage the Government’s limited financial support without further increases to
finance government debt.
 FINANCING FRAMEWORK

Long term financing structure relies on the housing fund

SUPPLY NATIONAL HOUSING DEVELOPMENT FUND DEMAND MORTGAGE REFINANCING

BANKS BANK Homes MORTGAGE BANKS

BUYERS Home
Loans
Offtake Agreement
Construction Finance TPS Cash Management &
Custody Mortgage Refinancing

Homes Homes KMRC

DEVELOPERS NATIONAL HOUSING DEVELOPMENT TPS BUYERS
NATIONAL HOUSING FUND Payments
Development FUND
Cost

Construction Finance

BANK SYNDICATED HO ME OWNERSHIP HOUSING BOND Homes CASH BUYERS BANK SYNDICATED
FACILITY SAVINGS PLAN (ABS ) FACILITY

Wholesale Funding
Funds Tax Credits Funds Coupons Wholesale Funding

HOME SAVERS & GOK & Multi -Lateral INVESTORS,

OFFSHORE EXPORT CREDIT INVESTORS
INVESTORS Bond Support BANKS & DFIs
BANKS AGENCIES

Custody Services

BANK

Jun-18 CONFIDENTIAL 16
 FINANCING FRAMEWORK

Flagship projects will rely on developer led financing

Financing model Description Precedent Timelines Preferred structure

 Select top 10 developers who are  South Africa where  3 – 6 months

backed by a financing institution/own municipalities selected Rationale for developer led
financing champion developers to model
 Agree on delivery timeline for a project build momentum for the
based on which payment milestones programme • Speed of engagement
A Developer led with champion developers
are met (year 2, year 4)
 Governments assures essential off-take will allow for accelerated
and gives undertaking to off-take groundbreaking and
houses delivery
• Avoids long/protracted
procurement processes
• Speedy financial close for
sites
 Housing bond is raised in the capital  USA where Mortgage  6 – 9 months • Housing Bond
markets targeted at patient capital Revenue Bonds (MRBs) development will be used
investors (pension funds, insurance and Multifamily Housing in the financing of
Housing companies, etc) Bonds, have made first- subsequent projects.
B Bond/TPS  Funds raised are used to finance TPS time homeownership
based buyers through the NHF. possible for over 3
 Investors are repaid via the monthly million lower income
cashflows from TPS buyers (asset families, approximately
backed security). 100,000 every year.
 GoK provides sinking fund for cases
where rent collected falls below bond
payment demands.

Jun-18 CONFIDENTIAL 17
 FINANCING FRAMEWORK

Kenya Mortgage Refinance Company

Principle Description

Objective of the  KMRC’s objective is to help Kenya grow its

company mortgage finance market for affordable housing
by providing medium and long-term liquidity to
mortgage lenders.
Legal structure  The KMRC has been incorporated as a Private
Limited Company owned by commercial banks
and Sacco's.
Bulk housing off-take  Initially KMRC would be financed through the
Multilateral investments, credit lines and
Government of Kenya equity investment.
 Subsequently KMRC would combine the
Multilateral investments with equity
investments from local banks, and with market
funding as the company starts to issue bonds.

Jun-18 CONFIDENTIAL 18
 SUPPLY CHAIN OPPORTUNITIES AND LINKAGES

Jun-18 CONFIDENTIAL 19
 SUPPLY CHAIN LINKAGES

Affordable housing production process beneficiaries

Skilled and
Unskilled
Workers

Contractors Government

The housing production process is expected to

generate employment for professionals, skilled and
Housing unskilled workers, revenue for the government and
Production
opportunities for manufacturers, contractors and
suppliers
Professionals Suppliers

Manufacturers

Jun-18 CONFIDENTIAL 20
 SUPPLY CHAIN LINKAGES

Affordable housing and supply chain opportunities

Material requirements for delivery of the 500,000 affordable homes programme
Millions
Stones for walling, Ft 566,5
Roofing tiles, Pcs 309,0
Cement, bags 85,5
Ceramic floor tiles, SM 60,0
Emulsion paint, Litres 40,0
Binding wire, KG 35,5
12mm diameter bars, Bars 20,5
River sand, Tonnes 18,8
Aggregate, Tonnes 18,8
10mm diameter bars, Bars 16,5
Assorted nails, Kg 15,0
Celotex ceiling boards, Pcs 15,0
Gloss paint, Litres 11,0
Pcc window cills, LM 11,0
Wood vanish, Litres 10,5
Ceramic wall tiles, SM 10,0
Steel hinges, Pcs 7,5
Clear window glasses, SM 3,5
Crown paint, Litres 3,5
Assorted flush doors, Pcs 2,5
Mortise locks, Pcs 2,5
Obscured sheet glasses, SM 1,0
Single leaf steel doors, Pcs 1,0
Steel casement windows, Pcs 1,0
15 mm ditto, Pcs 0,8
BRC Mesh fabrics, Rolls 0,8
*Figures provided above are estimates and may be subject to change as project specifications and parameters are defined

Jun-18 CONFIDENTIAL 21
 SUPPLY CHAIN LINKAGES

Affordable housing and economic development

The affordable housing program can have an impact on the broader economy beyond the delivery of homes

• The people who are hired on housing projects increase spending within the surrounding economy and thereby induce
Impact on further growth in their local areas and ultimately having a direct impact on the GDP
GDP • We estimate that the 500,000 affordable homes programme will double the contribution of real estate and construction to
GDP from the current 7% to 14% by 2022. Between USD 1.5 and USD 3 induced in the economy for every USD 1 invested

• Increased construction activity even has benefits for government agencies and regulators as it becomes an important
Enhanced source of revenue through processing of permits, approvals, and other related activity
government
collections

• Affordable housing projects have an impact on supply chain and workforce by creating new opportunities to hire varied
professionals to deliver the programme

Job creation

However, these benefits can only be achieved at local level if we provide practical solutions to industry and supply chain participants across both the
informal and formal sectors of the economy

Jun-18 CONFIDENTIAL 22
 SUPPLY CHAIN LINKAGES

Supply chain and manufacturing

Economies of scale How do we do it Obligations on suppliers
 Our affordable housing program  Provide offtake agreements for  Require suppliers to meet our
needs to provide economies of scale suppliers of major inputs development framework standards for
for suppliers of construction materials  Work with industrialization to quality and capacity (double or triple
 Primary benefits are: identify suppliers production)
 Secure supply of inputs for our  Sensitize them on the  Require suppliers to demonstrate
projects requirements of the program compliance with definitions of locally
 Justify investments in expanded  Provide a framework agreement on sourced or locally produced materials
capacity by suppliers consistent supply at stated
 Requiring suppliers to demonstrate
volumes and standards
 Drive the cost of materials down that materials were utilized in
(designation)
which affects affordability affordable homes program
 Support domestically produced
materials by ringfencing procurement  Require suppliers to partner with
for certain categories of materials and informal sector aggregators or job
supplies cooperatives to provide commercial
opportunities for participation in the
 Promotion of JVs between local and
affordable housing projects
international companies for flexible
manufacturing

Jun-18 CONFIDENTIAL 23
 SUPPLY CHAIN LINKAGES

Supply chain and manufacturing

Alternative Building Materials How do we do it Obligations on suppliers

and Technology  Provide permanent exhibition space  Require suppliers to pay for exhibition
 Our affordable housing program where housing units can be space and demonstrate use of
needs to provide avenues for constructed and technologies technology onsite
adoption of alternative building demonstrated  Require suppliers to maintain
materials and technology (ABMTs)  Secured 1 acre on ASK site structures onsite so that public and
together with related user training  Issued international tender to other end users can access education
 Primary benefits are: invite companies to display and experience of ABMTs
housing technology
 Drive the cost of materials down
which affects affordability  This will include green design
and building technologies
 Improve rapid production so as to
attain annual housing production
targets

Jun-18 CONFIDENTIAL 24
 SUPPLY CHAIN LINKAGES

Informal sector integration

Formalizing informal sector How do we do it Obligations on participants

 Our affordable housing program  Create supplier and workforce  Require participants to register with
needs to provide an avenue for aggregators through job cooperatives job cooperatives or aggregators
formalizing the informal sector for or other appropriate mechanisms  Require participants to register with
providers of goods and services as  Allocate land and industrial space for iTax
well as workforce incubation of cottage industries e.g.  Require cooperatives or aggregators
 Primary benefits are: market spaces can have allocated to provide training and licensing for
 Create avenues for wealth creation industrial workspace participants
and job creation for low-income  Allow for graded standards of  Require participants to adhere to
segment of working population compliance with regulations to allow standards and working requirements
 Generate new income tax revenue for incremental improvements e.g. in the development framework
through increased income of professional indemnity insurance
participants  Require aggregators or job
requirements could be relaxed until a
 Facilitate transfer of skills, cooperatives to report on provision of
certain income level is achieved
compliance with industry goods and services to affordable
standards, and formalization of  Create frameworks for auditing housing projects
cottage industries compliance with development
frameworks and other relevant
regulations

Jun-18 CONFIDENTIAL 25
 SUPPLY CHAIN LINKAGES

Enabling environment

Enabling environment How do we do it Obligations on suppliers

 Our affordable housing program  Fast track approval of amendments to  Require suppliers to meet our
needs to provide an enabling the building code so that a variety of development framework standards for
environment especially on regulations lower cost materials are permitted for quality and capacity
that affect the construction sector and building  Require suppliers to demonstrate
building materials  Changes to procurement law to favor compliance with definitions of locally
 Primary benefits are: locally sourced or produced goods sourced or locally produced materials
 Create incentives and services  Requiring suppliers to demonstrate
 Increase availability of lower cost  Tax incentives including deferred VAT that materials were utilized in
building materials tax, reduced or waived taxes, etc. affordable homes program
 Drive the cost of materials down  Provision of stamp duty waivers or
which affects affordability reductions
 Reduction of approval fees at certain
levels
 Provide one stop shop of registration
and permitting of suppliers for the
affordable housing program

Jun-18 CONFIDENTIAL 26
Q&A
Thank You