How Government will make half a million Kenyans home owners

Real Estate and Insurance Concept. [Photo: Courtesy]

Every Kenyan with a payslip will help the Government fund the half a million housing units plan under proposals fronted by Finance Cabinet Secretary Henry Rotich.

Although there is confusion about how much each employee will contribute, the Government says the scheme will see 2,000 houses set up in each county. The houses will be allocated under a lottery scheme to ensure it is not taken over by cartels.

Making his Budget speech last week, Mr Rotich said every employee would contribute 0.5 per cent of their gross salary, but later in the Finance Bill, the proposal was one per cent.

Yesterday, the CS said this would be amended but failed to specify which was the correct figure.

"I think we will harmonise that. Our proposal was to have the start rate because the proposal we got from the Ministry of Housing was 5 per cent and we thought that was too high," he said.

"We decided to start small but we will harmonise them, whether we will take the 0.5 per cent or 1 per cent in total or each. The right one is in the Budget speech."

Employers are also staring at higher labour costs since they will also foot a similar amount which, if aligned to the Employment Act, will attract the cost.

Although the CS hinted the deduction was not necessarily mandatory, Housing and Urban Development Principal Secretary Charles Hinga said it would be a statutory deduction just like the national pension fund.

Institute of Certified Public Accountants of Kenya chairman Julius Mwatu said the contribution would have to be compulsory to get the desired results.

"It will work the way NSSF works. If, for example, you are earning Sh100,000, your employer contributes Sh500 and you are also expected to contribute Sh500," he said.

Mr Hinga said the money would go into the National Housing Development Fund, which can be accessed through a tenant purchase deal for those in affordable housing brackets or securitised for mortgages for those with means.

The ministry will then create a website to assign each person an automated score on whether they fall under low cost, social or mortgage housing cap.

For those in the mortgage cap, the contribution can be used as a deposit when you want to buy a mortgage or interest rate buy back to make the mortgage cheaper.