500,000 Affordable Homes Program De Deli livery ry fram amework - PowerPoint PPT Presentation

500,000 Affordable Homes Program De Deli livery ry fram amework ework and poli licy interven rventio tions ns November 2018

INTRODUC ODUCTIO ION 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 15% of GDP from the 500,000 affordable homes manufacturing sector 100% 100% Universal Health Coverage Food and Nutrition (UHC) Security Job creati ation at scale le Infrast rastructu ructure re inve vestme stment Comp mpeti titi tive ve util ilit ity y cost sts Gove vernan rnance ce Secu curi rity ty Tech chnolo logy y innovati vation Jobs creation at scale Infrastructure Competitive Governance Security Technology investment utility costs innovation Nov-18 CONFIDENTIAL 2

INTRODUC ODUCTIO ION Why is housing a part of the Big 4 Agenda? 1 Housing ranks high after food as a fundamental human need. 2 Our Constitution in Article 43 (1)( b) recognizes the right to accessible and adequate housing, and to reasonable standards of sanitation. Kenyans in urban area spend a considerable part of their 3 income on rent, for instance, Nairobi residents spend more than 40% of their income on rent, well above the recommended 30%. 4 The cheapest home formally built by a developer in 2012 cost more than $15,000, which is more than 10 times the average annual income of $1,340. Available lower income housing is not adequate 5 and does not promote a quality of life that we want as evidenced by the fact that 6.4M Kenyans were living in slums representing about 56% of the country’s urban population. Nov-18 CONFIDENTIAL 3

INTRODUC ODUCTIO ION Affordable housing and economic development The e afford ffordable ble hous using ing progr rogram m can n have e an impa pact on the e broa oader er economy onomy beyond nd the e deliv livery ery of homes mes Forma rmaliza lization ion Impa Impa pact on pact on of the e Job Job ob crea ob crea reation reation ion ion GDP GDP GDP GDP infor forma mal l sec ecto tor • Estimate that the contribution of real • Construction of housing is labor • Ringfencing strategies will ensure estate and construction to GDP will intensive that the Jua Kali sector are able to increase from the current 7% to 14% • Labor can capture up to 10.5% of the supply inputs to the affordable by 2022. value created by the spend on housing program • Between USD 1.5 and USD 3 affordable housing • Light industries will also have the induced in the economy for every • We estimate that for every unit opportunity to provide construction USD 1 invested materials such as cement constructed, there are 3 – 5 new jobs • Increased construction activity can created become an important source of • Up to 8 indirect jobs created per unit revenue through processing of permits, approvals, and other related activity Nov-18 CONFIDENTIAL 4

INTRODUC ODUCTIO ION The current housing deficit is 1.9M and growing Annual housing supply vs demand country wide Number 170.000 High end Low end ▪ It is estimated that Kenya ya has an annual al housin sing deman mand of 250,0 ,000 annuall ally y with an estim imated ated supply ly of 50,0 ,000 p.a. (80% deficit) targeting the high-end market. ▪ In 2010 the deman mand for urban an housi sing was estim imated ated at around 80,0 ,000 units a year, with demand projected to incr crease ase to near arly ly 300 00,0 ,000 unit its s a year by 205 050. . By comparison, in 2013 only ly 15,0 ,000 housin sing constr structi ction permi rmits ts were re issued in Nairo robi, , where most demand exists and most of these were for high-income apartments. ▪ Only ly 2 percen rcent t of formal rmally ly constr structe cted house ses s are targeted ted to the lower inco come segme ments s of the market, which account for the largest share of demand. 80.000 ▪ Fur urthermore more, , estim imat ates es of hou ousi sing g deman emand are for new ew hou ousi sing g only nly and d do o not speak ak to the high igh quali alitat tative ive housin sing defi ficit cit in Kenya ya esti timate mated at 1.8 mn mn. . ▪ The high igh cost t of formal rmal housin sing mean ans s that t home me ownersh rship ip is out t of reach ach for 49.000 most st urban an Kenyan yans s with vast majority of this population finding housing through rental markets (91% in Nairobi) ▪ Kenya has an estimated 25,000 mortgages 1.000 Annual demand Annual supply for housing for housing SOURCE: State Department for Housing and Urban Development, World Bank Nov-18 CONFIDENTIAL 5

INTRODUC ODUCTIO ION We require solutions to enhance supply and facilitate demand SUPP PPLY LY SIDE DE • Developers have limitations on the number of units they can build because there are no guarantees on who will buy • Buyers lack adequate funding to take up units • Instead of building thousands of units, they limit their risks • They do not qualify for mortgages and build only limited numbers because of lumpy cash flows • Existing mortgages are too costly due to high interest rates and short repayment periods DEMAND AND SIDE DE Nov-18 CONFIDENTIAL 6

INTRODUC ODUCTIO ION The affordable housing program incorporates supply, demand, and enabling environment interventions  proven demand master plan and mega city approach  mixed use developments with provision of social infrastructure and amenities  affordable developer financing Supply  Provision of land and bulk infrastructure  Tenant Purchase Schemes  Infrastructure funding under (TPS) K.U.S.P   KMRC (extending Mortgages Tax incentives tenures)  Tax breaks ( Zero rating of  Housing Portal to assist in Stamp duty for first time identifying the end buyer Demand home owners Enablers  Standardised designs and/or processes Nov-18 CONFIDENTIAL 7

INTRODUC ODUCTIO ION The affordable housing program currently targets three income segments Income Range: KES 100,000 + Middle to High Income ▪ 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% Nov-18 CONFIDENTIAL 8

INTRODUC ODUCTIO ION Affordable housing program max. unit costs To enhance range of affordability, we have the maximum cost for each unit to be delivered under the program 1 room 2 room Bedsitter 1 bedroom 2 bedroom 3 bedroom KES KES KES KES KES KES • 600,000 • 1,000,000 • n/a • n/a • n/a • n/a Social housing (Max. Selling Price) • • • 800,000 • 1,000,000 • 2,000,000 • 3,000,000 n/a n/a Affordable Housing (Max. Selling Price) Nov-18 CONFIDENTIAL 9

INTRODUC ODUCTIO ION Key priority areas Reduc duce e cos ost t of cons onstru truction tion per r squa uare re Hous usin ing g spre read for or the he affor fforda dable ble Enha hanc nce e affo ford rdability ility of homes mes by meter ter homes mes pilla llar by land nd owners nership hip addres ddressing ing inter teres est t rate te and d tenu nure re Cost t per r squa quare e meter ter Hous usin ing g spre read Cost t of home me owners nership hip KSh Units %/Years 25 44,754 Interest Tenure -30% 0% 500,000 150,000 31,328 200,000 10 8 7 150,000 Nation tional Count unty Priv ivate te Tota tal l Saccos Hous usin ing g Fund nd Mark rket t rate te Hous usin ing g progr ogramme mme units its Nov-18 CONFIDENTIAL 10

INTRODUC ODUCTIO ION Key priority areas Inc ncre rease e cons onstru ruction ion sec ecto tor r Close ose the e low-in income me hous using ing gap p by Crea eate e 350, 0,00 000 0 jobs bs in the e cont ontrib ribut ution ion to GDP 60% 60% cons onstru ruction ion sec ecto tor Contr ntribut ibution ion to GDP Jobs obs crea eated ed Low income ome hous using ing gap KSh Billions Thousands Thousands 905 350 000 170 000 452 +100% -60% +600% 70 000 50 000 2018 2022 2022 2022 2018 2018 Nov-18 CONFIDENTIAL 11

PROJECT PIPELINE