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

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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.

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Housing Distribution in Kenya (Demand)

• Most real estate developments target the upper and middle to upper classes meaning lower class not catered for

Upper class10%

Middle Class30%

Lower Class60%

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HIGHLIGHT- REAL ESTATE

Fraudulent sale Verify ownership, purchase title insuranceAdverse possession Obtain a boundary survey from a licensed surveyorEnvironmental contamination

Obtain environmental survey, test for contaminants (lead paint, asbestos, soil contaminants, etc.)

Building component or system failure

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 shortfallMaintain sufficient liquid or cash reserves to cover costs and debt service for a period of time,

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HIGHLIGHT- REAL ESTATE RISK

Economic downturnPurchase 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 riskCarefully analyze financial performance using conservative assumptions, ensure that the property can generate enough cash flow to support itself

Market DeclinePurchase properties based on a conservative approach that the market might decline and rental income may also decrease

Fire, flood, personal injury Insurance policy on the property

Tax Planning Plan purchases and sales around an exit strategy to save taxes.

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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

Town House

Land

1600- 2500

3000- 4500

½ acre

14- 40M

30- 90M

20-60M

Middle- Mombasa road, langata,south b, south c, Thika road

Apartment

Maisonette

1000- 1500

1300-2000

5.5- 15M

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

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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.

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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

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LAND VALUES IN VARIOUS RESIDENTIAL AREAS BETWEEN 1990&2006

-

5,000,000.00

10,000,000.00

15,000,000.00

20,000,000.00

25,000,000.00

30,000,000.00

35,000,000.00

40,000,000.00

45,000,000.00

ESTATE

VA

LU

E

1990

1993

1996

2000

2003

2005

2006

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.

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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

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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

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)

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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

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Loan processingThe 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

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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.

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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.

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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, Co-operative House Building, Tel:- +254 20 3276000/972

• kindly contact us on 0703027000/0202776000, SMS 16111 or email us oncustomerservice@co-opbank.co.ke