Category Archives: Kenya mortgages

Kutwa Tuesday: From Stanchart to LPG

stories found this week

Stanchart Bank:

Smaller profit – Standard Chartered is being much maligned for being the first bank to report a profit drop in 2008 of 4% to 4.7 billion shillings. ($59 million) (Increased 29% in 07). The bank which adopted a conservative approach compared to Barclays, KCB and Equity. Stanchart had asset growth of 9% to 99 billion (13% in 07), deposits up 4% to 77 billion and loans up 10% to 43 billion in 2008. Still their shareholders will get the highest dividend of any listed bank in 2008.

Here are some other performance comparisons of the main banks that have so far reported their 2008 results.

Goes for smaller customers – In a slight about turn, Stanchart has also launched a new low cost transactional account called Hifadhi, costs 2,000 to open, no ledger fees, or ‘cash handling fees’ with e-statements you only pay for transactions you incur, though its’ not as affordable as other ‘cheap’ bank accounts for small earners. Going for smaller customer has been a recurrent theme in 2008 with banks, insurance and investment companies lowering the minimum subscription amount. Examples are pepea from Barclays, Toboa from Old Mutual and even the Government of Kenya which lowered the minimum investment for GoK treasury bonds to just Kshs. 50,000 (~$625)

Bank briefs
– Stanchart get back to what they are good at – big corporate deals this one for Kengen
– Gulf African launches a shariah compliant mortgage scheme
– New bank branches: First Community bank now in Malindi, Ecobank in Kisii, while Family Bank re-opened in Githurai
– Another SMS sends Equity customers into bank panic withdrawals this time in Machakos.

From the blogs

Siasa mbaya, maisha mbaya: Global economic slump aside, Nairobi’s Stock Exchange will not see a bull run until the country’s political problems are sorted out according to MainaT

The Sunday Nation broke a story of the old Embakasi airport been handed over to an unlicensed new airline, but airport analysis comes from one Coldtusker

Following in the success of the infrastructure bond (over-subscribed by 45%), the Kenya Government is offering another bond to supplement its budget deficit; this one is for 8.5 billion ($106 million). More details from Conceptadvisoryservices and the minimum investment is just 50,000 ($625).

Kenya Rugby Effects: Kenya had a wonderful run at the IRB World Cup in Dubai, and knocked out defending champions Fiji in the quarter finals. Here’s some rugby loss reactionfrom Fiji.

Elsewhere

Employees lose & lose – it’s been a bad week for employees as the Employment Act was set aside and the government shifted more of the pension burden to civil servants to contribute towards their own retirement funds.

Madaraka finalized – Madaraka Estate houses were finally sold, apparently ending a long long running saga between homeowners, the City Council and the National Housing Corporation who should really update their website.

Laptop mania – so many offers for laptops these days, new this week were
– Safaricom selling Macbook with broadband modem for 100,000 ($1,250)
– Acer A110 laptop on sale with open office for $230 – great for Kenyans new to mini laptop market
– Even my bank/broker (CFC) hawks Acer Aspire 4710 and has loans that work out to 5,500 ($70) per month

Is Grad School a Con? – Half the Sunday Nation advertisements were for colleges aiming at the recent high school graduates whose results were announced last week. Also growing are the numbers of universities and master programs, but this article argues against going to grad school to avoid the recession with the author pointing out that;

– Grad school pointlessly delays adulthood.
– PhD programs are pyramid schemes
– Business school is not going to help 90% of the people who go.
– Most jobs are better than they seem: You can learn from any job.
– Graduate school forces you to overinvest: It’s too high risk.
(found at chris blattman)

LPG Shocker – when to buy cooking gas last night. Found the cylinder, however it appears that there is now a valve that will be mandatory on all cylinders from April 2009 – it is a universal valve, that will enable consumers to buy LPG /cooking gas from any supplier e.g. Kenol., Total, NOCK – replacing cylinders from any of them, since they will now have a common head/valve. The move is supposed to break the monopoly of established companies e.g. if you had a Kenol gas cylinder, you could only replace it at Kenol when buying new gas, whereas if you wanted to switch to Shell gas, you’d have to buy a brand new cylinder.


new gas cap

The problem was that many Total stations did not have the valve. (I checked at three stations) and they all sent me to the place that has everything in Kenya – Nakumatt. Nakumatt also say they stock valves for all companies, but only had the generic caps to sell. It’s scary to use a generic caps, since there are many fires in Kenya caused by exploding/leaking cooking gas cylinders. Hope this turns out ok when April comes around and more consumers realize they have to buy caps which cost anywhere from 500 ($6.25) to 900 shillings each, another cost to the burdened urban consumer. It would also be nice if oil companies and/or the Government conducted some consumer awareness about this matter, not leaving it to Nakumatt and untrained Petrol attendants.

Property Expo

The Property & Home Living Expo 2009 was held at Sarit Center this weekend. It was rather subdued (fewer banks and exhibitors) compared to the last homes expo held in October 2008. The only banks in attendance were perennial mortgage lenders Housing Finance and (KCB) – Savings & Loan

Most of the exhibitors were property agents including:
– Knight Frank Vipingo Ridge golf villa for Kshs. 19 million, rents at Riverside Park and the (under-construction) Sameer business park
– Villa Care
– Regent (also the Hacienda eco-city Africa’s first eco-city, 2,3,4 flats & bungalows in Mwakirunge – north coast and (under construction) Green House a huge shop /office complex next to Adams Arcade)
– Others were Sedco and Vidmerck

Other exhibitors included a Dubai property company, the Kenya Power & Lighting Company (KPLC) who now have a stima loan for new customers to get loans through Equity Bank to pay for electricity installation/connection charges, Climacento green tech (info@climacento.co.ke) who advertise 50% savings on electricity bill through their solar water heater and Mekan Mattress experts (found at Nakumatt)


Real Estate Moment

This last post on Kenyan real estate produced a ton of great feedback, hence another one.

Home Expo
The 2008 Home Expo took place over the weekend at KICC, which was nice to attend, though it was strange that there was a simultaneous one (for home interiors?) as Sarit Center over the same weekend/period

Financers
– Standard Chartered: Up to 90% finance, Up to 20 year loans, decision in 48 hours. Also offer equity release loans
– Barclays: 14.5% interest rate, 10% down payment (reduced from 15%), and loans up to 20 years
– Housing Finance: have Start up plan (12 to 20 years),
House plan (5 to 12 years) and Ace plan (<5 years) loans for owner occupied, investment residential, equity release & top up, construction loans, residential plots, buy a plot & build.
– S&L: interest of 14% variable or 15% fixed, loans for individuals can be up to 25 years, while for companies & investment/rentals is 10 years, and estate development , just 2 years. In major towns they finance up to 90% for owner occupied and 80% for income generating properties (i.e. 20% down payment); while for rural properties it is 70% for owner occupied and 60% for income generating

Savings: S&L and the banks have various savings plans, while Bora real estate investment management (BREIL) were also represented with a plan starting at Kshs. 10,000 ($135)

Insurance: AIG Kenya were notable marketing home insurance packages that escalate to match the appreciating cost of home repair, include a domestic employee cover (DYK employers are liable in their house maids are injury or die?) and also cover the cost of trauma in the event of an attempted home theft.

Home Internet: Zuku (from Wananchi) vs. net@home vs. Broadband hotspots from Safaricom

Solar heating: at a time of record domestic electricity bills for consumers, alternative energy (mainly solar) products were on offer from Davis & Shirtliff, Solar Exide, and Sharp.

From the Blogs
– Funny Money Kenyan Entrepreneur questions the growing debt burden in Kenya, some of which is rel estate real estate, arguing that the numbers don’t add up. Meanwhile, there’s an offline article in the East African by Joachim Buwembo that attributes the rapidly growing and appreciating real estate markets in east Africa in part to hot money that previously used to fly to Swiss bank accounts
– John McCain has 7 homes: I’m partial to Fahari Estate but this post by MainaT raises an interesting point about other towns (e.g. Nyeri, Kericho, Malindi) worthy of real state investment, for work or retirement.

HFCK rights issue

Housing Finance shareholders are expected to raise the Bank’s share capital from 575 million to 1.18 billion shillings ($16.8 million) by the creation of 120.75 million new shares or one new share for each existing share held. About 5% of the shares are reserved for the company’s employees leaving 115 million shares to be added to the company’s listing on the NSE.

HFCK and S&L (owned by KCB) are still a major player in the mortgages sector which is becoming a crowded field with new entrants Stanbic, Standard Chartered, and next to be joined by cash rich Equity Bank.

Mortgage 2005

The 2005 Homes Expo was held at Sarit Centre over the weekend. Various financial institutions were represented at the fair all offering various mortgage products. While HFCK and Savings & Loan (KCB) have been in the mortgage business for years, low interest rates beginning in 2003 caused Barclays, Standard Chartered and other banks to enter this market.
Others mortgage players not represented at the fair include: Credit Unions, East Africa Building Society (about to merge with Akiba Bank), Commercial Bank of Africa, I&M Bank and NIC Bank.

Some general facts
– For comparison purposes, I used a typical 6 million shilling ($75,000) property such as a 3 bedroom flat in Kilimani or a 4 bedroom maisonette in South C
– The longer the mortgage period, the higher the interest rate
– While most loans are variable rates, recently some banks have introduced fixed-rate mortgages
– Banks finance less (i.e. higher down payment) if you don’t live in the property
– Banks finance less for properties out of major towns (or not at all)

Barclays
Barclays will finance up to 85%, loan repayable over 15 years at a variable rate of 12.5%. You can use the facility to build new home, transfer your current mortgage, or borrow against your property (an equity release) to meet other financial obligations.

To buy your 6 million home, your down payment is 900,000 ($11,250) and Barclays will finance 5.1 million ($63,750). Annual repayments on the 5.1 million will range from 445,000 ($5,600) in year 1 and reduce to 62,000 ($775) in year 15.

Housing Finance Company of Kenya (HFCK)
Has a 3-plan mortgage scheme;
(1) Startup Plan mortgage: 10 to 15 year mortgage designed for 1st time borrowers
(2) House Plan mortgage: 5 to 10 year mortgage – for those who want to repay mortgage faster e.g. are closer to retirement
(3) Ace Plan mortgage: less than 5 years for those who have higher disposable incomes or are making investments

You can use HFCK loans for owner-occupied (you live there), investment residential (you don’t live there) equity release, construction loans & residential plots (maximum of 2 years for development to begin) purposes. Generally they finance up to 80% if you live there, 70% if you don’t.
– Interest rate is what gets some HFCK borrower into trouble. Their current base rate is 13.75 p.a. and in the StartUp Plan (for the 6 million shilling house) you pay Base +4% p.a. If you prove to be a good with your repayments, you get a discount of 1% p.a., but if you fall behind on repayments, you arrears attract an interest rate of base +5%.
– Closing costs are at least 5% of market value (including 4% stamp duty, 1% commitment fee, and other fees)
– Your 6 million house for 1st time borrowers falls into the Start up mortgage and after a down payment of 1.2 million ($15,000), HFCK will finance 4.8 million ($60,000)

KCB through their subsidiary “Savings & Loan Kenya Ltd.”
– Loans are charged 12.5% for up to 15 years for residential house or flats, and 12% for estate development.
– They finance up to 80% of property in Nairobi, Mombasa, Kisumu, Nakuru and Thika and only 70% if it is a property you’re not living in or are located in another town (i.e. you increase your down payment from 20% to 30%)
– Their loans are available to any borrower with repayment ability, but for salaried people the loan maximum is such that repayments must not exceed more than 2/3 of your net monthly salary
– Typical fees include: appraisal fee (1%), ledger fees 350 shillings/month, legal fees, stamp duty (4%), registration fee (0.2%)
– Typical repayment: To buy your 6 million shilling house, your down payment is 1.2 million ($15,000) and KCB will finance the remaining 80% (4.8 million $60,000). Repayment in year 1 will be about 450,000 (5,625) in year 1, and reduce to 70,000 ($875) in year 15

Standard Chartered
With Stanchart, you can build new home, transfer your current mortgage or borrow against your property (an equity release) to meet other financial obligations and the Bank says that loans are approved within 48 hours.
– This is at a fixed interest rate for up to 10 years is 14.5%, up to 15 years is 15.5%, and they finance up to 85% of property financed i.e. you put 15% down payment
– To buy your 6 million home, down payment is 900,000 ($11,250) and Stanchart will finance 5.1 million ($63,750) – and over the 15 years, repayments on the 5.1 million loan will be 72,000 per month.
– They also have a variable rate mortgage, which will result in monthly repayments of about 68,000 per month over 15 years to but your 6 million shilling home.