KCB Bank Group plans to borrow up to $150million in long-term financing to support its mortgage kitty. The group which offers mortgage financing through its subsidiary S&L Mortage has plans to raise the money by the end of the year.
According to The East African, analysts at Kestrel Capital expect the bank to take in the additional funds as a way of correcting the mismatch between the repayment periods of mortgages, and the length of deposits.
“We note that KCB might raise a further $100-150million in the second half of the year through long-term (of 7 year) borrowing from international bodies in order to manage the asset-liability mismatch that is arising out of increased lending to the mortgage sector and also for foreign currency lending,” analysts at Kestrel capital said on Tuesday in a research note to investors.
KCB’s lending to the real estate sector has been growing, with the mortgage book currently accounting for 14. 6% of the bank’s loan book compared to 12.7% in the first quarter of 2011. KCB expects that lending to real estate development will account for about 25% of its total loans in this financial period.
Due to to the high interest rates on mortgages, which currently averages at about 19%, real estate developers and home owners are shying away from loans. This is expected to slow the uptake of new mortgage loans, in turn reducing the rate at which new housing units meant to bridge the deficit on the market will be developed.
According to statistics by the Ministry of Housing, Kenya has a housing demand of about 250,000 new units a year with a supply of only about 50,000 new units.