Housing Finance managing director, Frank Ireri. Photo/FREDRICK ONYANGO

Housing Finance managing director, Frank Ireri. Photo | FILE 


Mortgage lender Housing Finance has projected that its house construction and commission agency businesses will contribute up to 40 per cent of the company’s total revenues in the next five years.

The mortgage firm is seeking to cut over-reliance on interest income from home loans as the major revenue earner.

The lender hopes that its diversification into the development of homes for sale, commission agency and contractor fees will help boost its overall profitability.

Frank Ireri, the HF managing director said the diversification will help the medium-sized lender to maximise on the high demand for housing.

“We are projecting that revenue from the new business lines and capital gains on the new homes HF is building will contribute 40 per cent of our revenues in five years,” said Mr Ireri on Thursday, after the company launched a service centre in Kitengela.

Through service centres, HF seeks to increase its reach across the country from where property for sale will be listed, while also allowing customers to open deposit accounts.

Non-interest income currently accounts for only 12 per cent of the mortgage lender’s revenue- most of which is still tied to the loans it extends in form of fees and commissions levied on customer loans.

Last year, HF’s total non-interest income was Sh254 million, while it reported total interest income of Sh2.4 billion on customers’ loans and advances. The company spent more than Sh1 billion on interest expense, depressing its overall net profits to Sh379 million.

But the firm’s diversification into the development of its own homes for sale would especially help the financier ride on the decade-long boom in the property market, according to Mr Ireri. Francis Mwangi, a research analyst at the Standard Investment Bank, agrees. “By moving into the new business lines, HF will be unlocking opportunities in segments that are less capital-intensive compared to mortgage loans which are long term,” he said.

“The firm would however need to set aside quite some funds to establish the new business lines from its resources if such an ambitious target is to be met,” Mr Mwangi added.

HF has announced that it would be seeking to raise fresh funds from international investors in form of long-term credit within the first quarter of next year to support its mortgage business after a sharp increase in interest rates since June.

Mr Ireri said that the surge in interest rates was expected to dampen uptake of mortgage loans after the lenders increased the average cost of loans to 25 per cent following a monetary tightening stance adopted by the CBK to tame inflation and stabilise the exchange rate.