500,000 Affordable

Homes Program
Project delivery and finance framework
overview
May 2018
 Abbreviations
ABS Asset Backed Securities MoU Memorandum of Understanding

AGPO Access to Government Procurement Opportunity NHC New National Housing Corporation

ASK Agricultural Society of Kenya NHDF National Housing Development Fund

CAPEX Capital Expenditure NLC National Land Commission

CS Cabinet Secretary NSSF National Social Security Fund

DFI Development Finance Institution NT National Treasury

DP Deputy President NYS National Youth Service

GoK Government of Kenya PPDA Public Procurement and Disposal of Assets Act

HE His Excellency, the President PS Principal Secretary

HQ Headquarters SACCOs Savings and Credit Cooperative Organizations

HUD State Department of Housing and Urban Development SME Small and Medium Sized Enterprises

IPDU Integrated Project Delivery Unit ToRs Terms of Reference

JV Joint Venture TPS Tenant Purchase Scheme

KMRC Kenya Mortgage Refinance Company WB World Bank

MoITD Ministry of Industrialization and Trade Development

May-18 CONFIDENTIAL 2
 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

May-18 CONFIDENTIAL 3
 INTRODUCTION

Big 4 Agenda
Over the next five years and founded on social impact, the Government of Kenya will implement the big four agenda targeting four priority initiatives

20% of GDP from the

500,000 affordable homes manufacturing sector

100%
100%
Universal Health Coverage
Food and Nutrition
(UHC)
Security

Job creation at scale Infrastructure investment Competitive utility costs Governance Security Technology innovation
Jobs creation at scale Infrastructure Competitive Governance Security Technology
investment utility costs innovation
May-18 CONFIDENTIAL 4
 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%

May-18 CONFIDENTIAL 5
 INTRODUCTION

Affordable housing program

To resolve the housing challenge in the low income segment, GoK will implement the 500,000 affordable homes programme which is part of the Big Four agenda

100000 500000
400000
500,000
homes

Affordable Social Total units

100%

Real estate &

construction Country wide
sector coverage
contribution
to GDP 7% 14
2017 2022

125000 350000
225000

350,000 jobs

Direct Indirect & Total jobs

jobs induced jobs

May-18 CONFIDENTIAL 6
 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

May-18 CONFIDENTIAL 7
 INTRODUCTION

Achievements to date

We are crystallizing the development framework

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 7 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

May-18 CONFIDENTIAL 8
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 (1,640) 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 2 (20,000)
▪ Cooperatives 3 (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)

May-18 CONFIDENTIAL 10
 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

May-18 CONFIDENTIAL 11
 PROJECT PIPELINE

Lot 1 details – National Government Initiatives

Lot 1A: Flagship projects Lot 1B: Flagship social housing projects Lot 1C: County 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
May-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

May-18 CONFIDENTIAL 13
DEVELOPMENT FRAMEWORK
 DEVELOPMENT FRAMEWORK

Key design principles

Open Space Smart Building

Technology Technology

Access &
Creating
Movement
Communities

Safety &
Security

May 18 CONFIDENTIAL 15
 DEVELOPMENT FRAMEWORK

Design principle: open space

Public Realm
Networks

Open Space

Active Spaces

Playground

Sports Facility Gathering Space Pocket Park

May 18 CONFIDENTIAL 16
 DEVELOPMENT FRAMEWORK

Design principle: access and movement

Cycling Path

Access
&
Movement

Green Verge

Treelined Avenue Pedestrian Friendly

May 18 CONFIDENTIAL 17
 DEVELOPMENT FRAMEWORK

Design principles: safety and security

Security

Management

Safety &
Security

Access Control Perimeter

May 18 CONFIDENTIAL 18
 DEVELOPMENT FRAMEWORK

Design principle: community facilities

Community Centre

Community
Facilities

Schools Retail Centre Clinic

May 18 CONFIDENTIAL 19
 DEVELOPMENT FRAMEWORK

Design principles: building technology

Building
Technology

Frame & In-Fill

Pre-cast Panel

InSitu Formwork

May 18 CONFIDENTIAL 20
 DEVELOPMENT FRAMEWORK

Design principles: smart technology

Telecommunication
Payment System

Smart
Technology

Gas Reticulation

Waste
Management

Renewable Energy Transportation Water

May 18 CONFIDENTIAL 21
 DEVELOPMENT FRAMEWORK

Typical land breakdown

Utilities, Roads,
and Services
25%

Residential
50%

Open Space
15%

Community Facilities
with Retail
10%

May 18 CONFIDENTIAL 22
 DEVELOPMENT FRAMEWORK

Typical site master planning

May 18 CONFIDENTIAL 23
 DEVELOPMENT FRAMEWORK

Modular design approach

May 18 CONFIDENTIAL 24
 DEVELOPMENT FRAMEWORK

Typical typology floor plans

May 18 CONFIDENTIAL 25
 DEVELOPMENT FRAMEWORK

Range of apartment building typologies

Type 1 - Option 1 Type 1 - Option 2

Type 2 - Option 1 Type 2 - Option 2

Type 3 - Option 1 Type 3 - Option 2

May 18 CONFIDENTIAL 26
 DEVELOPMENT FRAMEWORK

Range of apartment finishes

Studio Unit
GFA: 20 sqm
Selling Price: KES 800,000

May 2018 CONFIDENTIAL 27

 DEVELOPMENT FRAMEWORK

Range of apartment finishes

One Bedroom Unit
GFA: 30 sqm
Selling Price: KES 1,000,000

May 2018 CONFIDENTIAL 28

 DEVELOPMENT FRAMEWORK

Range of apartment finishes

Two Bedroom Unit
GFA: 40 sqm
Selling Price: KES 2,000,000

May 2018 CONFIDENTIAL 29

 DEVELOPMENT FRAMEWORK

Range of apartment finishes

Three Bedroom Unit
GFA: 60 sqm
Selling Price: KES 3,000,000

May 2018 CONFIDENTIAL 30

 DEVELOPMENT FRAMEWORK

Modular and traditional construction

Structural Frame & In-fill Pre-Cast Frame In-Situ System

• Structural slab, • reduced wet • Most widely used in

columns / beams; works trades on current supply chain;
• Block in-fill with site; • relatively low skill labour
traditional stone • created in factory required;
• Mix of off-site and on- conditions for increased • Programme takes longer
site construction quality; than alternatives;
methods • logistical opportunities • More demanding for on
• Maximise local content through just in time site logistics;
and contractors principles; • Multiple trades linked on
engagement • standardisation principles delivery
reflected in design

May 18 CONFIDENTIAL 31
FINANCING FRAMEWORK OVERVIEW
 FINANCING FRAMEWORK

Overview of the financing framework

Principle Description

National Housing Development Fund ▪ The National Housing Development Fund is the bulk housing aggregator and off-taker. Undertaking for off-take
(NHDF) as an aggregator 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 options/developer ▪ The sale of homes by the National Housing Development Fund to buyers will take three forms: a tenant purchase
exit 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 finance ▪ The programme will leverage the Government’s limited financial support without further increases to
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
DEVELOPERS NATIONAL HOUSING DEVELOPMENT Homes
TPS BUYERS KMRC
NATIONAL HOUSING FUND
Development FUND Payments
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

May-18 CONFIDENTIAL 34
 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.

May-18 CONFIDENTIAL 35
 FINANCING FRAMEWORK

National Housing Development Fund

The National Housing Development Fund will mobilize capital and offer certainty of sales in the form of an off-take undertaking

Principle Description

Capital mobilization ▪ The Housing Fund will mobilize capital from

Government, Development Finance Institutions,
Contributions from the Home Owners Saving Plan
(HOSP) and Local Banks to fulfil its mandate.
Off-take
De-risking ▪ Offer certainty of sales in the form of an off-take undertaking
developers undertaking that will allow the developers access and cash
construction financing. National Housing
▪ Purchase the housing units for cash once construction is Development Fund
complete to allow the developers to recycle their capital
and develop more units.
Enabling ▪ Allow ordinary Kenyans to save for an affordable home
homeowners via and the Home Owners Savings Plan which they can
use as a down payment towards their affordable house.
▪ Offer home buyers the ability to purchase their homes
via an affordable 25-year Tenant Purchase Scheme.
▪ Allow home buyers the ability to purchase affordable
houses nationwide through the Housing Fund.

May-18 CONFIDENTIAL 36
 FINANCING FRAMEWORK

Kenya Mortgage Refinance Company

Principle Description

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

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.

May-18 CONFIDENTIAL 37
 FINANCING FRAMEWORK

Mobilizing government contribution

Government contribution will also be achieved through corresponding spend by enabler ministries ILLUSTRATIVE: ENERGY CONTRIBUTION TO HOUSING

2018 priority actions Input needed from other ministries

1 Develop new tariff structure, incl. ▪ Volume growth projections for key industrial
Systematic ▪ Power policy/incentive for high use industrial manufacturers (what will MOIED commit to?)
reduction in manufacturers ▪ Absorption capacity of KAM member entities: 12
cost of power sectors, incl. textile, apparel, cotton, agro-processing,
from 17.6 O&G, construction, mining (incl. iron & steel), ICT and
KES/kWh today fish processing – e.g. Athi River industrial sheds

Manu- ▪ Lower time of use tariff (ToU) to 3.55-4.60 KES/kWh (half ▪ Already implemented
facturing of the original rate for commercial and industrial ▪ Estimates of impact of expansion to additional
customers, on additional units compared to last period) segments
How to Provide transmission and distribution for key commercial ▪ Volume growth projections for areas with industrial
2
support Big and industrial consumers manufacturers and energy-intensive users
4 ▪ Industrial park plan details
3 Reduce duration of outages to improve reliability of power ▪ N/A

4 Ensure the Rabai Malindi-Garsen line passes through ▪ Timeline and prioritization for priority agropolis
Food Galana to support the irrigation scheme
security Agro-processing to benefit from ToU (50% reduction in
5
Industry energy tariff).
specific 6 Distribution lines to new housing complexes ▪ Timeline and prioritization for priority housing
initiatives to Housing complexes, for example Mavoko 55 acres
increase access
Universal
to power and 7 3-phase power provided/ upgraded at 46 hospitals ▪ List of top ten hospitals, as well as second wave
reduce cost health
hospitals from longer list of 46 new hospitals
coverage

May-18 CONFIDENTIAL 38
LEGAL FRAMEWORK
 LEGAL FRAMEWORK

Principles of legal framework

Framework Agreement
(For Developers / Contractors)
• Shortlisting and prequalification of Developers/Contractors, subject to competitive tender
under relevant procurement rules and regulations
• Agreement between SDHUD and the Contractor/Developer to govern the development of
housing sites

Off-take Agreement
• Ensure off-take of housing units constructed through the National Housing Development
Fund

Early Works Agreement

• For the performance of early works on selected sites in collaboration with suitable
government agencies such as NYS, etc.

May-18 CONFIDENTIAL
Q&A

Thank you