• Thursday, February 29, 2024
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InfraCredit guarantees N3bn initial debt financing for Modern Shelter affordable housing project

InfraCredit admits AIICO Insurance as its second domestic institutional investor

InfraCredit has guaranteed N3 billion initial debt financing under a N12.5 billion debt programme for Modern Shelter Systems and Services Limited (Modern Shelter).

It is for the development of 370 affordable housing units according to IFC’s green building standard (EDGE) in Nasarawa Technology Village under a co-financing structure with the Shelter Afrique Development Bank (Shelter Afrique). This project aims to develop up to 1,200 EDGE-certified housing units in Nasarawa State.

This transaction is the first housing project to be executed under the InfraCredit’s Affordable Housing Funding Programme (the Programme). The Programme seeks to address the funding constraints faced by developers resulting from the lack of an institutional mechanism to provide both developers and homebuyers with access to affordable funding required to make both home financing and the final sale predictable and scalable. The Programme is being implemented in collaboration with development partners through technical assistance support.

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Chinua Azubike, Chief Executive Officer, InfraCredit said, “We are excited with the successful closing of this transaction and the significance of the project in the housing sector, because of our ability to replicate and scale its impact. Sustainable green housing delivery is the pathway to a balanced built environment, and with the success of this transaction with Modern Shelter, we have a unique opportunity to work with our development partners in demonstrating innovative financing solutions to transition into new buildings, designed to meet energy efficiency standards, create green jobs and support climate resilient economic growth. The Nasarawa Technology Village project underscores a successful example of public–private partnerships as a mechanism of unlocking climate financing for sustainable development”.

Abdulmalik Mahdi, Managing Director, Modern Shelter said, “Modern Shelter is proud to have emerged as a pioneer adopter of EDGE in 2021 (under a previous project Earth-Point Modern Shelter) and this recent transaction marks another significant milestone for Modern Shelter, providing us with access to stable, well-structured, long-term funding essential for delivering EDGE-certified affordable housing. This achievement owes much to the invaluable support of InfraCredit and Shelter Afrique. In collaboration with ABS Blueprint Limited and the Nasarawa State Government, we are wholeheartedly dedicated to alleviating Nigeria’s housing deficit with an unwavering focus on ensuring the project’s quality and timely completion.”

Emilio Cattaneo, Head of PIDG TA said: “PIDG is proud of its involvement in this project since early 2021, and to have supported InfraCredit and the Housing Solutions Fund through the provision of a grant facility to finance a number of the critical workstreams of this pioneering initiative. The provision of affordable housing, constructed following the highest environmental standards, is fully aligned with PIDG’s mission of promoting the development of critical infrastructure, which is both climate resilient and sustainably constructed, and which addresses the significant funding gap that exists in the sector, by mobilising private capital. We look forward to the future rollout and expansion of this programme.”

Maurice Okoli, Chief Investment Officer, Housing Solution Fund said, “I firmly believe that increasing homeownership accessibility and affordability relies on embracing innovative and collaborative frameworks. Our commitment is unwavering as we strive to eliminate fragmentation within the housing sector while fostering strategic partnerships in a dynamic ecosystem that spans both the demand and supply sides. We look forward to participating in more transactions with InfraCredit and Shelter Afrique”.

Thierno-Habib Hann, M.D., Shelter Afrique said, “In forging this partnership, we are not just expanding the scope of infrastructure to include housing, but also amplifying the impact of inclusive development. By combining the strengths of Shelter Afrique and InfraCredit, we are pioneering an approach that harmonizes housing with traditional infrastructure, thereby addressing crucial needs and transforming communities. This collaboration underpins our commitment to scaling up interventions in Nigeria, mitigating off-take risks, and providing beneficiaries with more accessible, affordable, and longer-tenured financing options, ultimately propelling sustainable development and prosperity.”

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InfraCredit has a pipeline of affordable housing developers under the Programme that will benefit from technical assistance support and transaction structuring towards a local currency bond issuance and incorporating E&S best practices. To date, InfraCredit has originated an initial pipeline of EDGE-compliant housing infrastructure projects sized at over N70 billion from six (6) housing developers, requiring InfraCredit’s guarantee support for their respective construction debt issuances.

Nigeria, with a current population of 213 million, faces a significant housing deficit with a population projected to reach 400 million by 2050, necessitating an annual construction of at least 900,000 units. The existing housing deficit is estimated to stand at 28 million units, requiring an estimated investment of N21 trillion to bridge the deficit.

Access to longer-term and affordable finance remains a major challenge for property developers and prospective homeowners. Structural market constraints include the lack of a pool of liquidity to provide long-term affordable and accessible housing purchase products to eligible homebuyers willing and able to pay, and weak intermediation mechanisms. This market failure has limited the ability of affordable housing developers to operate sustainably at scale.

The Project was conceived as a Public-Private Partnership (PPP) arrangement between the Nasarawa State Government (NASG) and ABS Blueprint Limited in 2021 and following the execution of a concession agreement, Modern Shelter was appointed as the preferred developer to implement the Project under the design-build-finance-operate-maintain (DBFOM) project delivery model.

The Project is targeted at low to middle income earners within Abuja and environ, a region populated with Ministries, Departments, and Agencies (MDAs) of Government, and will enlist no fewer than seven (7) highly skilled sub-contractors. The construction will prioritize the use of locally sourced building materials, procured in bulk at financial close, thereby minimizing exposure to importation or foreign exchange (FX) risks and mitigating the impact of inflationary pressures. The Project is expected to create 1,220 new jobs, yield a c. 20percent reduction in carbon emissions, and provide 370 new homes for low-income households when complete.

Shelter Afrique financed Modern Shelter’s NGN3 billion debt transaction which underscores the institution’s mandate of supporting the development of Africa’s housing sector. On the demand side, the Housing Solution Fund (the “Fund”) entered into an offtake agreement with Modern Shelter under which it will facilitate the provision of affordable long-dated (up to 25 years) home loans to eligible homebuyers. The Fund is a local currency real estate investment trust (REIT) authorised and registered by the Securities and Exchange Commission of Nigeria under a N100 billion programme, and is sponsored by development partners, pension funds, and insurance companies.

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The upfront due diligence and transaction costs including the EDGE certification costs for the Project were supported by funding provided by the Private Infrastructure Development Group (PIDG) through InfraCredit co-founder GuarantCo, under the Technical Assistance (TA) Grant Agreement with InfraCredit which was designed to support InfraCredit’s Programme to help develop a scalable and sustainable approach to improving affordable housing delivery in Nigeria.