Kenya-based urban development financier Shelter Afrique plans to invest $80 million in east Africa this year, looking past immediate concerns about inflation and high interest rates to long-term demand for housing from middle-income buyers.
Managing director Alassane Ba said on Friday his firm will sign a loan agreement worth $40 million with Tanzania’s state-run National Housing Corp in March to build homes in that country.
Shelter Afrique also plans to invest $10 million in low-cost housing in Rwanda and $30 million in equity stakes with property developers in Kenya, the region’s biggest economy.
The company is also searching for investment opportunities in Uganda, but had not allocated any specific amount for the land-locked coffee producing country.
“Inflation and high interest rates are short-term concerns, but we’re still looking for investment opportunities in the housing market in this region,” Ba told Reuters.
“These challenges are temporary. The housing market is just under a small adjustment and it’s the best time to invest.”
Year-on-year inflation rates in the east African nations of Kenya, Tanzania and Uganda rose sharply last year to double-digits driven by high oil prices on the global market and weak local currencies.
An aggressive tightening of monetary policy in Kenya and Uganda have helped ease inflation in those two countries, but has left mortgage holders grappling with extremely high interest rates.
Commercial banks in Kenyan have raised lending rates to about 25 percent from 15 percent since October, prompting lawmakers to propose a new law to cap the rates.
In Uganda, traders closed their businesses in January in a three-day strike to force banks to stop raising rates which had soared to 29 percent from 19 percent in a few months.
Shelter Afrique, which raised 2.5 billion shillings through a medium-term loan in August, said it intends to lend the funds to developers at a base rate of 13 percent, nearly half what commercial banks are offering at the moment.
“The target market for the funds will be the middle income segment where demand for housing is insatiable,” Ba said.
The regional lender, which is jointly owned by 42 African governments, the African Development Bank and African Re-Insurance Corporation, raises most of its hard currencies from the international capital market.
It has extended about $124 million in credit to private developers in Kenya’s real estate market since inception in 1995 and is in negotiations that could see the Chinese government buy a stake in the company.
“With the (economic) slowdown we are witnessing in the rest of the world, all money is coming to Africa. It’s the best time for Africa,” Ba said.