Housing Finance in Kenya
Landowners can obtain funds through a loan from a commercial bank, capital venture firms and pooling of investor capital by forming a joint venture.
There are many ways to obtain funds for housing or any other real estate investments, especially for commercial properties. Landowners can obtain funds in three main major models; a loan from a commercial bank, capital venture firms where capital investors jointly come through a venture or pooling of investor capital by forming a joint venture.
1. Commercial bank loaning
In this case, a landowner approaches a bank with all the details of the project to be financed. To determine the commercial viability of the project the bank will go through all the details from, the target market, the total cost of the whole project and even the project location so as to approve it. It is the most common model for aspirants in the real estate business for it has well-laid guidelines, is well systematic and allows room for perfect development as the real estate grows.
One major hindrance that comes with commercial bank loaning for housing finance is that it comes with very high-interest rates.
2. Capital venture firms
These are firms composed of shareholders with real good money who are looking for investments to pool in their cash with an aim of making a profit out of it all. the real estate market in Kenya is really gaining good profit, making this financing model a go for starters with real good projects or real estate ideas.
The land owner and the invetors come together to start a company specifically for this project. They then agree on the terms and how the profits can be shared.
3. Investor pooling of resources
This is usually done by individual investors who come together by counter-checking on their needs and what to have in order to invest in real estate. They can also add in other investors with big resources and a big eye for real estate developments, as this creates a big purchasing power thus increasing the rewards and profits out of it all.
By adding in more investors the main project owner will achieve more than what he could have achieved alone.
Groups formed normally have a life cycle of 3 to 8 years depending on the project. However, they must first agree on the terms and profitability ratio and how it falls on each individual member. The cost of purchasing land and developing the whole project lies with the terms agreed upon.
As you know housing loans do stretch for a long period of time and within this repayment duration, one might need funds for other activities such as medical and other life events that need big funding. Housing finance can sometimes offer one more than just a home loan. The existing housing finance companies have evolved and can offer financials to cater for non-housing expenditures. An example is a top up loan.
-Edited by Skeeter Imisa