A Kenyan green affordable housing fund has hit the first close at $85 million with the backing of the UK Climate Investments (UKCI) and FSD Africa Investments (FSDAi).
The UKCI said that since the fund is still in the fundraising stage in the US, its name is not being shared publicly due to disclosure norms. It may start deploying capital soon as it has marked the first close.
The UKCI, the UK Government’s International Climate Finance flagship programme, has committed £30 million (Ksh 4.4 billion, or $41.6 million). FSDAi, the investment arm of the UK government’s flagship financial sector development agency in Africa, has committed £5 million (Ksh 740 million). This means the two investors together account for more than half the fund’s corpus at first close.
The fund is structured as a 10-year locally managed investment vehicle, which at full size will deliver approximately 10,000 new green, affordable homes for low-income families in Kenya.
The fund will back housing units at an average cost of £30,500 (Ksh 4.5 million) and rentals ranging from £100 (Ksh 15,000) to £350 (Ksh 50,000) per month.
Despite booming demand for affordable housing in Kenya only 50,000 new homes are built each year compared to a target of 250,000 housing units. This has resulted in unaffordable housing prices and continued growth of the city’s informal settlements. Today, nearly half of Nairobi’s population lives in slums where construction standards are poor and unsustainable, and access to essential services is limited.
The UKCI and FSDAi’s investment mainly targets Kenya’s capital, Nairobi, and will contribute to the country’s goal of building 500,000 new affordable homes by 2022. The focus on green buildings will also tie up with the country’s shift towards clean power. Renewable energy accounts for 60% of power generation in Kenya as of 2019.
Managed by Macquarie Asset Management, the world’s largest infrastructure manager, the UKCI is a £200 million pilot investment programme mandated to invest in India and sub-Saharan Africa.