FINANCIAL SOLUTION
FOR THE KENYAN IN
DIASPORA
LOS ANGELES
12TH NOVEMBER 2011
THE CO-OPERATIVE BANK
•
The Co-operative Bank was formed by co-operators
through their co-operative societies in 1965 to deliver
financial services to the Co-operative Movement in
general for maximum benefit of the societies’ members.
Started operations in 1968
• Listed on the NSE in 2008
• The Co-operative is the key strategic investor holding a
65% stake in the bank.
• 35% is owned by private investors
THE CO-OPERATIVE BANK
• One of the largest tier 1 banks in Kenya in terms of asset
base and Share capital.
• 526 ATMs and over140 branches placed both onsite and
offsite for customer convenience.
• The Bank is a key stakeholder of the Co-operative
Movement , a key segment of our economy mobilizing
over 30% of Gross Domestic Savings .
• Over 4 M customers
• The bank has a comprehensive network of correspondent
banks covering all major financial centres and currencies
in the world.
DIASPORA BANKING
Co-operative bank has been offering Diaspora banking services for over
4 years. During these times we have been able to grow and be one of
the biggest providers of Diaspora banking services. This has been
achieved by;
– Giving the diaspora control of there finances at home
– Opening channels to invest in various sectors
– Educate diasporas on Kenyan economic market
– Offer easy banking solutions
– We also offer a Jamhuri account and the Good home mortgage’s
for the diasporas in the following currencies KSH, USD, GBP and
EURO
REAL ESTATE INVESTMENT IN
KENYA
PRESENTATION
Kenuks- Kenya UK Savings and Credit
Society
4/8/2015
5
Introduction
• Kenya is rated as one of the countries with a very
vibrant financial system in Africa.
• Not withstanding there are serious funding gaps in
housing, resistance to adopt non traditional
building technology and infrastructural challenges.
• runaway land prices
• Lack of an active secondary mortgage market
• slow land registration process.
• shortage of houses.
4/8/2015
6
Housing Distribution
in Kenya (Demand)
• Most real estate
developments target the
upper and middle to upper
classes meaning lower class
not catered for
Upper class
10%
Middle Class
30%
Lower Class
60%
4/8/2015
7
7
HIGHLIGHT- REAL ESTATE
Fraudulent sale
Adverse possession
Environmental
contamination
Building component or
system failure
Verify ownership, purchase title insurance
Obtain a boundary survey from a licensed surveyor
Obtain environmental survey, test for contaminants
(lead paint, asbestos, soil contaminants, etc.)
Complete full inspection prior to purchase, perform
regular maintenance
Overpayment at
purchase
Obtain third-party appraisals and perform discounted
cash flow analysis as part of the investment pro forma,
do not rely on capital appreciation as the primary source
of gain for the investment
Cash shortfall
Maintain sufficient liquid or cash reserves to cover costs
and debt service for a period of time,
4/8/2015
8
HIGHLIGHT- REAL ESTATE RISK
Economic downturn
Purchase properties with distinctive features in desirable locations to
stand out from competition, control cost structure, have tenants sign
long term leases
Tenant destruction of property
Screen potential tenants carefully, hire experienced property managers
Underestimation of risk
Carefully analyze financial performance using conservative assumptions,
ensure that the property can generate enough cash flow to support itself
Fire, flood, personal injury
Purchase properties based on a conservative approach that the market
might decline and rental income may also decrease
Insurance policy on the property
Tax Planning
Plan purchases and sales around an exit strategy to save taxes.
Market Decline
4/8/2015
9
BACKGROUND TO KENYA
REAL ESTATE MARKET
Area
Type of unit
Average Square feet
Price Guide in Kshs.
Upmarket- kilimani,
kileleshwa, lavington,
Karen, runda etc
Apartment
1600- 2500
14- 40M
Town House
Land
3000- 4500
½ acre
30- 90M
20-60M
Middle- Mombasa
road, langata,south b,
south c, Thika road
Apartment
1000- 1500
5.5- 15M
Maisonette
1300-2000
9m- 25M
Lower to middle
Mombasa road,
Eastland's, Kitengela
Apartments
Maisonette
Bungalow
Plot (1/4 & 1/8)
1000- 1200
1500- 1700
1200- 1500
1- 8M
8- 15M
6- 9M
600,000- 6,000,000
•
Note: prices are indicative based on current market conditions and not representative on any specific property
4/8/2015
10
4/8/2015
11
What is Good home Mortgage?
• Is the mortgage product for Co-operative Bank of
Kenya
• It seeks to simplify the mortgage process
• Targeted products hence offering a large array of real
estate acquisition and construction solutions
• We can finance anywhere in Kenya provided it is
within a municipality
• We can provide multifaceted solutions in conjunction
with other cooperative bank product offerings.
4/8/2015
12
Types of needs
we finance the Diaspora
• Investment residential- where property will be
rented out
• Equity release against a property that customer
already owns (not applicable for plots)
• Commercial cum residential- property comprising of
shops and residential flats
• Residential plot purchase- for redevelopment
• Construction of single dwelling units or multiple units
4/8/2015
13
LAND VALUES IN VARIOUS RESIDENTIAL AREAS BETWEEN 1990&2006
45,000,000.00
40,000,000.00
35,000,000.00
1990
1993
1996
2000
2003
2005
2006
25,000,000.00
20,000,000.00
15,000,000.00
10,000,000.00
5,000,000.00
LL
EY
TO
N
VA
R
IN
G
SP
LA
V
IN
G
AN
I
LI
M
KI
H
ER
U
PP
ES
TL
A
N
D
S
IL
L
-
W
VALUE
30,000,000.00
ESTATE
4/8/2015
14
MORTGAGE STEPS
The first step is to locate the property and do an initial property
appraisal.
• Assess the type of title.
• Possible Value versus price.
• Use versus location.
• Accessibility of the property.
• Adaptability to the intended use.
• Above requires also an interview process to determine the
suitability of the prospective borrower.
• Evaluate what product package is suitable for the client
considering nature of employment.
4/8/2015
15
Key documents
• 3 months payslips
• 6 months bank statements (where salary is paid)
• Letter of introduction from employer- stating income, duration of
employment and retirement age
• Current employment contract
• Copy of passport (where expired page of renewal must be included)
• Work permit/residency permit
• Utility bill (water, electricity, cable TV, rental lease)
• Latest tax returns (as may be requested for specific cases)
• Open or operate a Co-operative Bank Jamhuri account
• Duly completed loan application form
4/8/2015
16
Additional
requirements
Property related
• Copy of title for property
offered as security
• Draft sale agreement/letter
of offer/sale agreement
• Customer required to raise
down payment plus
additional cost/amounts
detailed herewith
4/8/2015
Costs/amounts
• Stamp Duty- 4%
• Legal fees
• Valuation fees (approx. 0.4%
of property value)
• Commitment fees- 2%
• One month instalment
• Insurances (Fire & Life)
(Cost range from 7-9% of
property value)
17
Construction
• Approved Architectural & Structural plans
• Bills of quantities from registered quantity surveyor
• Evidence of customers equity (construction down
payment)
• Contractor appointment letter
• CVs/Profiles of design team
• Project feasibility report – for multiple units or
project finance prepared by a project manager
4/8/2015
18
Loan processing
The following are steps in the mortgage process:
• Step 1: Documentation (presentation of complete application)
• Step 2: Approval & offer letter (where loan is approved
customer is given offer letter for signing). This may be passed
onto agent for further forwarding to customer
• Step 3: Instructions and legal process: after receipt of
accepted offer legal team is advised to commence security
perfection
• Step 4: Disbursement (done after receipt of registered
documents) and customer advised of payment
4/8/2015
19
Diaspora Customer Tips
• Always present full application documents for assessment on
how much you qualify for before making down payment or
signing sale agreement for any property.
• If possible have a contact in kenya (preferably someone you
trust) to visit the property and advice you on its state and
carry out an official search on your behalf.
• Give in complete requirements from onset of application to
save on TAT
• A customer may opt to use a power of attorney in which case
this should registered at Ministry of lands and presented at
point of applying for loan.
4/8/2015
20
Why Good home
Mortgage






No penalty on accelerated lump sum payments.
Attractive interest rates
The interest is on a reducing balance.
Tiered Interest rate subject to the term of the loan
No penalty for early mortgage payoff
No minimum or maximum limit to the amount that can be
lent
 Good faith estimate: document showing itemized list of fees
and costs associated with the mortgage.
4/8/2015
21
Communication
• Account Opening can be facilitated by downloading our
account form from our website www.co-opbank.co.ke or
through the bank’s appointed agents.
• The bank has a dedicated Diaspora Banking unit to
address your issues back home. They can be reached on
the mail address diasporabanking@co-opbank.co.ke, Cooperative House Building, Tel:- +254 20 3276000/972
• kindly contact us on 0703027000/0202776000, SMS
16111 or email us oncustomerservice@coopbank.co.ke