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Housing Finance | newsletter

Construction Finance

(i) BACKGROUND

Housing Finance has accumulated expert experience spanning over 40 years in construction/project finance with emphasis in multiple housing developments. An in-house expert team works closely with the established professionals in the design and construction industry in development of investor’s concepts into viable projects with personalized service to meet a wide range of unique client needs.

Products and services offered include;
  • Short-term construction loan of 4 to 6 months for construction of single dwelling units.
  • Short-term multiple development construction loans and bridging loan facilities for a period of up to 24 months.
  • Long-term financing of a wide spectrum of commercial and residential properties for rental.
  • Evaluation of construction projects proposals for project concept, commercial, technical and financial viability.
  • Marketing support through availing developer’s access to our website link, display of properties in our ultra modern property point for wide reach.
(ii) CONSTRUCTION LOANS

The following loans are available for qualified applicants;

1. Single Dwelling Development Loan

This is a loan for construction of a single house. During the periods of constructing the building, the loan is considered as a construction loan. A construction loan is a loan in which Housing Finance advances funds for the construction of a building and takes a financial responsibility over the payments during the construction phase (see FAQ for more). Upon completion of construction and ascertainment of the unit’s fitness for occupancy, the construction loan shall be converted into a mortgage payable over a negotiated period but any case not exceeding 20 years under the three-plan structure.

2. Multi Development Loan

(a) Build-to-Sell Residential/Commercial Properties
This is a loan for developments (either for commercial or residential use) for sale to the final owners upon completion. The construction loan under this approach is tailored to be disbursed alongside project implementation mainly upon presentation of certificates of works completed. The principal loan amount disbursed shall not be payable during the construction period. The repayment of the loan upon completion is linked to sale of completed developments with the option of early retirement that does not attract any penalties or fees. The developers’ motivation for profit on total investment is supported through this form of bridging finance up until the sales are concluded within a negotiated period.

(b) Build-to-Rent-Residential/Commercial Properties
This loan is available for developers to build multiple units for rental income. Similarly, as in the case of built-to-sale, the loan is structured such that principal repayment falls due upon start of commercial operations i.e. completion and occupation of the lettable space/residential units over a specified and agreed period. The construction loan is converted upon start of commercial operations into a mortgage and is repayable on the applicable terms.

3. Property Improvements Loan

This is a loan facility for enhancement of value for existing developments. The works to be financed could take one of the following forms:

  • Property renovation and/or
  • Utility enhancement/customization

The loans would normally be secured against the properties to be improved and shall be made repayable on flexible terms.

(iii) REQUIREMENTS FOR LOAN APPLICATION
1. Single Dwelling Development Loan
  • Approved designs & building plans with supporting bills of quantities.
  • Copy of property title (leasehold properties should a minimum of 45 years on unexpired lease).
  • Copy of an executed building contract agreement stipulating the appointed professionals.
  • A performance bond from the appointed contractor with all risks insurance cover.
  • Establishment of a Lengo account (require completed account-opening forms with copies of identification documents and 2 passport size photographs. NB: if joint account, marriage certificate or a sworn affidavit required).
  • Evidence of the project equity contribution by applicant.
  • For incomplete and stalled projects, a brief write-up on the project history stating duration of implementation, previous source of finance, original estimated cost and causes for delay.


Where the applicant is a company (additional requirements):

  • Certificate of registration and copy of the Memorandum and Articles of Association.
  • Board resolution to borrow and give security.
  • Certified copy of change of company directors where applicable.
  • Certified copy of latest company annual returns.
  • Director’s personal guarantees for the proposed borrowing.
2. Multi Development Loan

For multiple developments clients will be required to submit a detailed project feasibility report that should include the following
Background Information.

  • Company’s legal status, ownership, organization and management.
  • Profile of company Directors and key management staff.
  • Business activity of the promoting company and trading history, including audited accounts for the past three years where applicable.
  • Project concept.

Commercial Aspects

  • Commercial aspects of the project that include a description of the product, selling price/rental income, comparative pricings for recently completed similar projects within a related locality, anticipated competition for the project outputs, unique selling points for the project/competitive advantages.

Technical Aspects

  • Planned location of the development and its suitability, availability of utilities and accessibility.
  • Specifications of the development including, site/estate plan, designs and detailed drawings with bills of quantities.
  • Approved environmental impact assessment report.
  • Planned project implementation schedule with activities and their timings
  • Specification of plant and service equipment required.

Financial Aspects

  • Projected investment and financing plan.
  • Projected cash flow during construction and up to full repayment of the loan.
  • Demonstration of sponsor’s capacity to meet their portion project financing.

Organization And Project Management

  • Planned management of the project during implementation to demonstrate qualification and experience for the key roles of; Project Management, Project Contractor, Architect, Quantity Surveyor, Structural Engineer and Electrical Engineer with information covering the following:
  • Profiles of the respective firm
  • Valid certificates of registration
  • List and brief description of recently completed projects and ongoing ones and their values

Project Documentation

  • Clean land title documents
  • Evidence of up to date payment of land rates and rent.
  • Approved architectural and structural drawings for the proposed project.
  • Original bills of quantities prepared by a qualified and registered quantity surveyor
  • Environmental Impact Assessment report by a competent party (in case of estate development)
  • Building contract agreement between developer and contractor.

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Kenyatta Avenue / Koinange Street
PO Box 30088 – 00100 GPO
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