HF Group has decided to exit the home construction business once it nears the completion of its ongoing construction projects. HF Group has taken the decision to quit home construction business, barely seven years after the establishment of its property development subsidiary Kenya Building Society (KBS). The move will lower its exposure in the real estate market. The real estate market has slowed down in the past few years.
The group Chief Executive Officer Robert Kibaara said that they will complete the units they are building this year and they will not start any new constructions. According to a report it indicated that the HF Group will also free up substantial resources. The Nairobi Securities Exchange -listed firm will free up resources currently tied up in its property development subsidiary HF Development and Investment Limited (HFDI) which has a capital of 1.2 billion. A unit which offers banking services HFC Limited will receive most of the assets and liabilities of HFDI. The transaction is meant to eliminate the duplication, as the two subsidiaries have been undertaking sale and development of property.
HFC will have the sole mandate of marketing the properties in the company’s portfolio, in addition HFDI will continue to hold a proportion of land and other properties. Following the exit, the company’s participation in real estate projects in the future will be through partnerships with other developers.
KBS was a key player in the Kenyan property development market in the 1980s and the 1990s before it became dormant for more than a decade. The KBS now trades with HFDI which was revived in May 2012 to cash in on the lucrative property development market. The revival of the subsidiary is critical in diversifying the company’s revenue streams and reducing dependency on interest interest income from the mortgage business. Over the years HFDI has completed commercial and residential projects in different parts of the country such as Kahawa Downs, Precious Gardens in Riruta, Komarock Heights and Richard Pointe along Kamiti Road. In May the previous year the company priced its property in Nairobi at 30 percent discount in a campaign dubbed Shika Nyumba na HF. This approach was to expedite the sale of its property.
Reports from HF Properties revealed that the real estate boom that helped HF to a high earning of Ksh 1.1 billion in the year ended December 2015. Increased defaults, interest rate caps and reduced demand led the company to incur a net loss of Ksh 598 million in the year ended December 2108. The banking business is less cycle but it has increasingly been dominated by big banks operating on a large scale.
Mortgage financier HF Group will exit the home construction business as its own dream has hit a brick wall.