Housing Finance has entered into a second joint venture with a landowner in Nairobi’s Kahawa area where it plans to build over 300 residential units.

This comes after the mortgage firm struck a similar deal with a landowner in Riruta where it is set to construct 328 houses from the second quarter.The firm says the joint ventures have been necessitated by rising land prices in urban areas.

“We are launching the joint venture in Kahawa in the second quarter. We are targeting residential units costing less than Sh6 million,” said Frank Ireri, HF’s managing director.

HF and the landowner will form a special purpose vehicle through which they will raise funds to develop the properties.

Mr Ireri said the Kahawa area deal will be similar to Riruta’s Precious Gardens where HF has a 50 per cent stake in the venture, targeting middle class buyers of homes priced from Sh4 million.

HF is betting on the joint ventures and its revived construction subsidiary Kenya Building Society (KBS) to get a larger share of the lucrative capital gains in the property sector besides growing its mortgage book.

Property developers have been enjoying double-digit returns from sale of houses and serviced land parcels in major towns.

A lower taxation rate helped HF to grow its net profit 19.4 per cent in the year ended December as high interest expenses eroded its interest income.

HF posted a net profit of Sh743.3 million in the period compared to Sh622.2 million a year earlier.

Its effective tax rate stood at 18 per cent last year compared to 36 per cent in 2011, with the company deferring the payment of Sh190.6 million worth of taxes to future years.

The deferred taxes were brought by the recognition of historical losses by KBS which the company revived last year after more than 15 years in dormancy.

Without the tax benefits, HF would have posted a decline in earnings as its profit before tax dropped seven per cent to Sh907.6 million compared to Sh975.7 million in 2011.

Its interest expenses doubled to Sh3.1 billion as the firm paid high rates on deposits of up to 21 per cent as lack of liquidity forced lenders to attract depositors with lucrative returns.