Volatility in the money market, which has made interest rates spike to a 10-year high, has seen Housing Finance suspend a planned borrowing.
The mortgage financier was expected to return to the debt market before the end of the year to raise Sh3 billion, the second and final tranche of the Sh10 billion bond that was approved by the Capital Market Authority last year.
“We cannot go to the market at the current interest rates since it will mean that we offer the bond at about 15 per cent to match what the government is currently offering,” Housing Finance managing director Frank Ireri said on Tuesday at a media workshop for journalists.
The 91-day Treasury bill, the benchmark government debt paper, is currently selling at 13.19 per cent, up from 2.41 per cent in January. The 13.19 per cent mark was last witnessed in April 2001.
“Such interests would also mean that we increase our mortgages’ interest rates, which is what we want to avoid,” Mr Ireri added. The first tranche amounting to Sh7 billion was priced at 7.5 per cent.
The firm said it has lined up at least three new property developments. The projects will be undertaken by its construction subsidiary, Kenya Building Society, which is currently being revived to help the mortgage financier tap into the lucrative property development market.
“We want to come back into construction of houses business from the last quarter of this year,” Mr Ireri said.
KBS, remembered for the development of Komarock and Buru Buru estates in Nairobi, has been inactive for over 15 years in what the parent firm terms as a deliberate shift in strategy to focus on offering credit facilities.