Developer Login

SME Construction

Construction finance is where we advance funds for the construction/development of a building. Disbursement of the funds is usually in stages/tranches as construction progresses.

These includes financing development/construction of property for the following purposes:

  • For own use (own occupation)
  • For investment 
  • For business purposes
  • For sale or rent

Construction finance solutions:

  • Project finance: Construction of multiple units for sale or rent
  • SME mortgage: A construction solution offering flexible options for delivery of a project including- fixed term contract, labour contract and equity release for amounts below Kshs. 50M.  
  • Mortgage construction: for amounts above Kshs. 50M

A construction finance facility can be sought by:

  • Individual borrowers (employed, diaspora or self-employed individuals)
  • Companies/Co-operatives

The units financed include:

  • Single residential units (house construction):
    This is a loan to finance the construction of a single dwelling residential property. The terms are that the project will have to be managed by an agreed group of professionals and disbursement will be on reimbursement basis to the person contracted to build the structure in arrears against architect’s certificates/QS valuations. 
    The loan is based on cost of construction / project costs. Since CO-OPERATIVE BANK is the lender of risk, the inspections would have to be carried out by their nominated officials before any payments are made. This eliminates the risk of funds being expended against value not created (un-matched security).
  • Commercial Properties:
    Commercial properties financed include:
    • Gated Communities (maisonettes, Apartments, bungalows)
    • Office developments
    • Hotels
    • Serviced plots
    • Shopping Malls
    • Golf Course Estates
    • Industrial estates
    • Other special projects including infrastructure

Project finance targets:

  • Real estate developers
  • Co-operatives
  • Investment firms or companies
  • Corporate entities keen on building office spaces
  • Real estate firms with rental objectives
  • Commercial entities keen building office spaces, shopping complexes, parking silos for rental
  • Government of Kenya through road infrastructure financing program
  • Hospitality related firms keen on developing hospitality facilities,
  • Serviced apartments and recreational centers

Depending on project magnitude, we allow:

  • Fixed contract
  • Labour contract

Features/benefits:

  • Single residential units: Up 85% financing based on cost of construction based on Bills of Quantities
  • Commercial/Commercial cum residential properties: Up to 70% financing based on cost of construction based on Bills of Quantities
  • Project finance: Up to 70% financing based on the Total Project Cost.
  • Disbursement done in tranches on re-imbursement basis to ensure proper project implementation and completion
  • Emphasis on project monitoring & evaluation through site inspections conducted by an in house team.
  • Ample grace period (moratorium) of up to 18 months (up to 36 months negotiable)
  • Projected income from the property under construction considered when assessing the qualification for a mortgage facility

Requirements:

  1. General requirements:
    • Duly completed application form
    • Copy of National ID / Passport
    • Copy of KRA PIN
    • Open / Operate a Co-op Bank account (to service loan repayments)
    • Current Valuation Report (upon loan approval)
    • Copy of Title / Lease over property offered as security (Minimum lease term - 25 years post loan tenure)
    • Copy of title for property being developed.
       
  2. Non-Salaried customers to provide:
    • Business history, profile and background
    • Business registration certificate
    • Audited Books of Accounts for last 3 years
    • Projected Cash-flows, Balance Sheet / Profit & Loss Account for next 3 years
    • Bank statements for the last 1 year to date; Co-op and Other Banks
    • Full details of all Borrowings and Facilities Advanced from other institutions (e.g. letters of offer, loan statements for 6 months)- where applicable
       
  3. Companies to additionally provide:
    • Memorandum & articles of association
    • Board resolution authorizing borrowing
    • Certificate of incorporation
       ​
  4. Land lords to additionally provide:
    • ​​Rental income schedules/Tenancy agreement
    • Proof of ownership for all rented properties
    • 6 months bank statements where rental income is banked
       
  5. Salaried customers to provide:
    • 3 months pay slips - Originals or Certified copies 
    • 6 months salary bank statements - Originals or Certified copies 
    • Letter from employer stating:  Position/ Length of service/ Retirement age/ Income/Employment terms, (permanent or contract details)
    • Where on contract employment: copies of existing and previous contracts & CV to confirm professional background
       
  6. Diaspora Customers to additionally provide:
    • Copy of Kenyan Passport
    • Registered Specific Power of attorney 
    • Utility bill
    • Copy of work permit/residency permit
    • KRA Pin Copy 
    • 3 months pay slips/paystubs - Originals or Certified copies 
    • 6 months salary bank statements - Originals or Certified copies 
    • Letter from employer stating:  Position/ Length of service/ Retirement age/ Income/Employment terms, (permanent or contract details)
    • Where on contract employment: copies of existing and previous contracts

*Diaspora documents have to be notarized by a Notary Public.

Additional requirements for SME Mortgage/Mortgage construction:

  1. Approved Architectural & Structural drawings  (approvals more than 2 years old must be renewed)
  2. Priced Bill of Quantities or Bills of quantities for outstanding works where project is incomplete from a Registered Quantity Surveyor.
  3. Profiles/CVs including registration certificates and practicing licenses for - Architect, Quantity Surveyor, Structural Engineer, Service Engineers, Contractor, Project Manager.
  4. Comprehensive Environmental Impact Assessment report by a competent party and the National Environmental Management Authority License.
  5. NCA compliance certificate for the project
  6. Service contracts with the professionals/consultants (as will be advised)
  7. Change of user where applicable
  8. Evidence of the project equity contribution- (through QS valuation of works done on site,  cash held or material on site.)

Project Finance- Specific Requirements

Background information

  • Memorandum & Articles of Association
  • Certificate of incorporation
  • Profiles of the directors.
  • Audited books of accounts for the past 3 years (where applicable)
  • Copy of KRA PIN Certificate
  • Board/Directors resolution authorizing the borrowing
  • Copy of title
  • Bank Statements for last 6 months
  • Description of the project concept and current status of project implementation
  • Duly completed application form - a letter will do in the interim

Project feasibility report with the following:

Market Analysis

  • Marketing plan
  • Commercial aspects of the project that include a description of the product, selling price/rental income, comparative pricing for recently completed similar projects, within the related locality, anticipated competition of the project product, unique selling points for the project/competitive advantages.

Financial Aspects

  • Financial aspect to include proposed project cost, proposed financing plan, proposed source of funds
  • Projected cash flow during construction and up to full repayment of the bank loan.
  • Evidence that developer has sufficient funds to finance own contribution on the project/interest servicing

Technical Aspects

  • Approved architectural and structural drawings for the proposed project
  • Original bills of quantities prepared by a qualified and registered quantity surveyor
  • Bills of outstanding works (for ongoing projects)
  • Proposed management of the project during construction including qualifications and experience for key functions that include; Project Management, Project Contractor, Architect, Quantity Surveyor,
  • Structural Engineer and Electrical Engineer with information covering the following;
    • Profiles of the respective firm
    • Valid certificates of registration and professional indemnity covers
    • List and brief description of recently completed projects and ongoing ones and values
  • Comprehensive Environmental Impact Assessment report by a competent party and the National Environmental Management Authority License.
  • NCA compliance certificate for the project
  • Clean land title documents in the developers name
  • Change of user where applicable 
  • Evidence that land rates and rent have been paid up-to-date.
  • Building contract agreements between developer and contractors and sub contract agreements with subcontracted firms.
  • Planned project implementation schedule with their activities and timing

Risk Assessment 

  • Identify the risks associated with the project 
  • Contingency plans to mitigate the risks 

Mortgage costs / amounts required for loan processing (8-9% of the property value)

  • Valuation fees 
  • Commitment fees 
  • Legal fees
  • Stamp duty 
  • Insurances – annual fire & life premium
  • Initial mortgage payments ( one month installment)

Other notes:

MAXIMUM REPAYMENT PERIOD

  • Self- employed individuals /SME borrowers - 15 years
  • Company borrowing - 10 years
  • Saccos/societies - 10-15 years
  • Employed borrowers - 20 years
  • Diaspora borrowers - 10 years
  • Land purchase - 5 years for self- employed and 10 years for employed 10 years.
  • Special schemes - 20 years