Kenya Affordable Housing Programme

Kenya Affordable Housing Programme Development Framework Guidelines

Kenya Affordable Housing Programme

Development Framework Guidelines

October 2018

Kenya Affordable Housing Programme Development Framework Guidelines

Document History

B A Revision

Revised Issue First Issue Purpose Description

10.12.2018 04.07.2018 Date

Kenya Affordable Housing Programme Development Framework Guidelines

Definition and Abbreviations

Entity or Term Affordable Housing Programme Architectural Association of Kenya Board of Directors Capital Markets Authority Central Bank of Kenya Central Organisation of Trade Unions Credit Reference Bureau Development Framework Guidelines Development Finance Institution Directorate of Occupational Safety and Health Services Environmental Impact Assessment Earned Value Analysis Federation of Kenya Employers Financial Institutions Government of Kenya House Ownership Savings Plan Identification Information Communication Technology Integrated Population Registration System Integrated Project Delivery Unit Joint Venture Joint Venture Agreement Kenya Bureau of Standards Kenya Mortgage Refinance Company Kenya Private Sector Alliance Kenya Property Developers Association Kenya Revenue Authority Know Your Customer Managing Agent Management Company National Construction Authority National Housing Corporation National Land Commission No Objection Certificate

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Abbreviation AHP AAK BoD CMA CBK COTU-K CRB DFGs DFI DOSHS EIA EVA FKE FIs GoK HOSP ID ICT IPRS IPDU JV JVA KEBS KMRC KEPSA KPDA KRA KYC MA MC NCA NHC NLC NOC

Kenya Affordable Housing Programme Development Framework Guidelines

Entity or Term Occupational Health and Safety Assessment Series Personal Identification Number Programme Management Consultant Primary Mortgage Lenders State Department of Housing, Urban Development Savings and Credit Cooperative Organization Special Purpose Vehicle Unstructured Supplementary Service Data Tenant Purchase Scheme Work Breakdown Structure

Abbreviation OHSAS PIN PMC PML SDHUD SACCO SPV USSD TPS WBS

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Kenya Affordable Housing Programme Development Framework Guidelines

Contents

Section

1.

Introduction

1.1 Purpose of the Development Framework Guidelines

1.2 Vision

2.

Fundamental Principles

2.1 Preferred Project Structure

2.2 Development Strategy

2.3 Development Considerations

2.4 Integrated Project Delivery Unit (IPDU)

3.

Project Delivery Process

3.1 Governance Gateway Process

3.2 Approach

4.

Project Development

4.1 Pipeline Development and Prioritisation Criteria

4.2 Project Initiation

4.3 Design Development

5.

Procurement

5.1 Background and Justification

5.2 Overview of the Specially Permitted Procurement Process

6.

Implementation

6.1 Construction

6.2 Handover and Close-out

7.

Funding Model

7.1 Overview

7.2 Proposed Cooperation Model and the Role of NHC

7.3 The Housing Fund

7.4 Kenya Mortgage Refinance Company

7.5 Role of Insurance

8.

Housing Portal

8.1 Primary Functions

8.2 System Functionality

9.

Updates and Revisions

Page

5

5 5 6

6 7 8 9 10

10 10 12

12 15 21 23

23 23 26

26 27 29

29 30 30 34 35 36

36 36 39

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Kenya Affordable Housing Programme Development Framework Guidelines

List of Figures

Figure 1.1 ? Housing Programme Priority Themes

5

Figure 2.1 ? Contractual Arrangements and Process of Engagement

6

Figure 3.1 ? Key Component of the Gateway Process

10

Figure 3.2 ? Gateway Delivery Process

11

Figure 4.1 ? Process of Engagement with Publicly Owned Land

12

Figure 4.2 ? Process of Engagement with Privately Owned Land

13

Figure 4.3 ? Multi Criteria Analysis

15

Figure 4.4 ? Key Steps in Public Participation

20

Figure 7.1 ? Summary of Affordable Housing Demand and Supply Side Interventions

29

Figure 7.2 ? JV Formation & Operation

30

Figure 7.3 ? Housing Fund Capitalization

32

Figure 7.4 ? KMRC Refinance Company Model

34

Figure 8.1 ? Applicant Profile Assessment

38

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Kenya Affordable Housing Programme Development Framework Guidelines

1. Introduction

The Government of Kenya (GoK) has committed to deliver a series of ambitious social programmes to promote long-term economic development for Kenyan citizens through its Big Four agenda: (1) affordable housing; (2) universal health coverage; (3) enhancing manufacturing; and (4) food security and nutrition.

As part of this vision, the State Department for Housing and Urban Development (SDHUD) has been mandated to deliver the Affordable Housing Programme (AHP) and will manage the delivery throughout the project lifecycle. The GoK will act as the key facilitator and will perform the following:

1.1 Purpose of the Development Framework Guidelines

The purpose of these Development Framework Guidelines (DFGs) is to provide qualitative guidance on the key components of the Affordable Housing Programme. These guidelines provide instruction on how the vision and policies of the GoK, through the SDHUD, will be implemented and how progress will be monitored and reviewed. The aim of the guidelines is to set out the following:

The rationale, priority needs, and trade-offs to achieve consistency between the assessment, policy formulation, and delivery of affordable housing.

The affordable housing delivery mechanisms and the means to ensure their financial viability, including the different sources of subsidy.

Consistent information for key stakeholders on the process of the development and delivery of affordable housing.

These guidelines have been produced with various industry stakeholders in mind including planning and housing experts, engineers, architects, surveyors, developers and financiers, legal consultants, and other technical consultants with a special interest in affordable housing.

1.2 Vision

The SDHUD will ensure that best practices and governance principles are implemented. The vision is that the Affordable Housing Programme priority themes are encapsulated and that local content is leveraged and developed to enable GoK deliver on its commitments to the Kenyan people.

5 Rev B

Figure 1.1 ? Housing Programme Priority Themes

Kenya Affordable Housing Programme Development Framework Guidelines

2. Fundamental Principles

As part of the development of affordable housing, and the goal to provide 500,000 homes over a four-year period, SDHUD has established some basic tenets which are set out below regarding the development and the delivery of the Affordable Housing Programme.

2.1 Preferred Project Structure

2.1.1 Contractual Arrangements

This section outlines the contractual arrangements and process of engagement with the developer, private investor or contractor. Figure 2.1 illustrates the process which is explained in more details in the sub-sections below.

Figure 2.1 ? Contractual Arrangements and Process of Engagement

Commitment Agreement This governs the use of the commitment fee which the successful developer, private investor or contractor shall provide, pending negotiations and signing of the Project Agreement. The basic provision of this Agreement is that it requires a commitment fee of up to 10% of the project cost of a particular development to be deposited by the developer into a designated escrow account as advised by SDHUD. SDHUD or NHC will not: use the commitment fee until the Housing Fund is operationalized and is in a financial position to underwrite the commitment fee; place any fiscal obligations on GoK in respect of any commitment fee. Development Framework Agreement This agreement provides a guideline of the fundamental heads of terms to be addressed and provided in the Project Agreement as project details emerge. It works as an "interim Agreement" for urgent works to commence pending final negotiations and execution of the Project Agreement. In detail, the Framework Agreement encapsulates the terms that the parties entering into the Project Agreement will negotiate and structure according to the needs of the development project, the transaction model, as well as the operating principles that will govern the parties' relationships. Project Agreement This agreement governs the relationship between the GoK and the developer, private investor, or contractor, and sets out in detail the terms and conditions for the development and delivery of each Project. Offtake Agreement This agreement is issued by the GoK in favour of the developer, private investor, or contractor as an undertaking for the purchase on behalf of the GoK of the completed housing units within a specified period from the date of construction completion, this time period being determined on a project-by-project basis.

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