The State will not take up additional shares in the Housing Finance rights issue announced yesterday, it has emerged.

The development gives a chance to existing shareholders interested in topping up their shares to take up the Treasury's portion.

The Government through Treasury retains a 7.87 per cent share holding in the mortgage lender.

A decision to keep Treasury out of the issue was arrived at in line with the Government's policy of relinquishing its share holding from a number of institutions as per the Privatisation act, said Managing Director Frank Ireri.

HF is the latest company in which the State has reduced its shares. Safaricom is the other institution in which the State has sold off 25 per cent stake to the public through the recently concluded share offer.

Those who stand to benefit from the development include Equity Bank, Nomura Nominees, Steel Son Limited and Kirinyaga Construction among others. This lot makes up the top 10 per cent of the shareholding in the mortgage financier.

The details of the State's move were made clear yesterday during the unveiling of the rights issue offer which runs to July 11.

A total of 115 million shares will be offered to existing shareholders at Sh20 per share, injecting an additional Sh2.3 billion into the company's capital base.

Ms Wanjiku Mugane of First Africa Capital, which is the lead transaction advisor, said that they arrived at the Sh20 price after considering a six month average Housing Finance share price at Nairobi Stock Exchange.

The firm also took into account a number of future growth prospects in the company and the future of the real estate market in the country.

"We arrived at a figure that best captures the pricing trends of HF shares and the future growth prospects of the company," said Mugane.

The company's timing for the rights issue comes just in time to mop up the Safaricom IPO refunds which dealers say is oversubscribed.

The proceeds from the rights issue will go towards establishing a leverage in the accounts of the company and also supporting the 5-year strategic plan announced in 2007.

Housing Finance will now be in a position to take up Sh25 billion in customer deposits and lend out up to Sh30 billion in loans to its customers.

Housing Finance has already announced a number of plans to reposition itself in the mortgage industry as a result of the capital injection.

"We are now in a position to launch a number of products into the market as a result of the capital injection received from the rights issue," said Ireri.

It plans to introduce a pension backed mortgage product in the market before the end of the year. For the proposal to be enacted however, treasury must first announce and pass into law how the pension savings will be operated.

In last year's budget, Treasury promised to introduce a number of incentives for the industry including using pension savings as security to access mortgage and high tax rebates. Analysts say this is likely to spark increased demand for mortgage products but they are yet to be passed into law.

Housing Finance is also planning to introduce a mortgage product targeted at individuals whose income is not pegged to a monthly payment timetable such as farmers and businessmen in the informal sector.

The products are part of short- term strategies that the mortgage financier is putting in place to re-position itself as a key player in the property industry.

The company will not increase its interest rates on mortgage loans as inflation begins to bite.

Housing Finance said that it will use land at the disposal of its investment arm -- Kenya Building Society -- to construct a commercial centre at a plot in Komarock to address property supply concerns.

The company also hopes to harness the synergy created as a result of partnerships with National Housing Corporation, Ministry of Housing and other players, to address residential housing concerns in the city.

"Funds generated by the rights issue will create an additional capacity to participate in the broad spectrum of housing," said Kung'u Gatabaki, the chair of HF's board of directors.

The company's shares ended Wednesday at Sh30.75, compared to Tuesday's close of Sh34.00 and a year high of Sh30.75 The new shares are expected to start trading on the Nairobi Stock Exchange (NSE) during the second week of July