IFC invests Sh3bn in affordable housing in Kenya

Amina Arif

IFC country manager Amina Arif during the signing of the Sh7 billion Financial Advisory Services Agreement between the National Treasury and Planning, International Finance Corporation and the National Housing Corporation to be channeled toward the execution of NHC's housing mandate, August 25, 2022.

Photo credit: Diana Ngila | Nation Media Group

The International Finance Corporation (IFC) is set to invest Sh2.95 billion ($ 20.9 million) towards the development and acquisition of approximately 5,000 newly developed green affordable housing properties in Kenya.

The World Bank’s private sector leaning arm said the equity co-investment will be made along with IHS Kenya Green Housing Partnership LLP and IHS Kenya Green Housing SCSp.

The IHS Kenya Green Housing Partnership LLP is a newly created 10-year closed-end fund set up to invest in affordable, green housing developments in Kenya managed by International Housing Solutions, an established investor in and manager of affordable housing in Southern Africa nations including South Africa, Namibia, and Botswana.

The proposed IFC investment will consist of up to Sh1.54billion ($10.9 million) from IFC’s account and up to Sh1.41billion ($10 million) equivalent from IFC acting as the implementing entity of the UK-IFC Market Accelerator for Green Construction Programme (MAGC). The fund has a target total equity investment of up to Sh19.81billion ($140 million) from various institutional investors.

“IFC will provide equity for the development of affordable housing projects with an initial focus on the Nairobi metropolitan area and selectively in other Kenyan counties,” the IFC said in a disclosure.

“The Fund will be managed by IHS Kenya Green Housing Fund GP Limited (“GP”), through its main investment management team based in Nairobi. IFC will utilise a “sidecar” investment structure by using a newly created special purpose vehicle that will have IFC as it's only limited partner co-investing alongside with the Fund in selected investments” it added.

The IFC said the fund will invest in real estate projects, with an initial focus on Nairobi county and a minimum of 15 percent of the fund’s committed to areas outside Nairobi.

Affordable housing forms a critical part of President William Ruto’s bottom-up economic transformation agenda(BETA). The government through the Finance Act 2023 has created a controversial three percent tax on workers’ pay to finance a Housing Fund that is targeted at the construction of affordable houses.

The housing contribution, which was earlier capped at a maximum of Sh2,500, and matched by employers, will now go directly to the government’s bank accounts as opposed to a fund.