The government should set aside at least Sh50 billion to rejuvenate the housing sector, according to local economic institute.
The Institute of Budget and Devolution says the sector has received a beating for the past three months from the coronavirus pandemic after coming out of a sluggish year, with recent floods aggravating the issue further.
Elias Mbau, the institute’s boss, told Home & Away that the real estate sector will find getting back to recovery hard because builders, buyers and sellers have been starved of cash and returns are “dwindling by the day”.
He said that to build enough houses for emerging demands, the economy must be growing at a rate of over six per cent.
SEE ALSO: Travelers are venturing out again but avoiding planes, international trips, survey
“Such a percentage depicts high cash flow, less inflation and low demand on credit hence relaxed repayment terms. Currently, coronavirus and floods have slowed economic growth projection to below two per cent,” said Mr Mbau.
“More reason why the government should pump money to critical sectors, housing being one of them.”
He said the sector can only be rejuvenated through a revolving fund to be utilised for the next two financial years to give zero-rated interest to housing cooperatives as well as provide heavy tax subsidies for the private sector to realise the housing agenda by 2022.
“Not that there is any chance that the agenda of building a million low-cost housing units by 2022 is realisable. But we all know it was a good projection that should not be derailed by restricted time-frame and the hardships that the viral scourge and floods have presented,” Mbau said.
SEE ALSO: So you want to own rental property?
Data from the National Housing Corporation (NHC) shows that the house deficit is two million units and grows by 200,000 each year.
At the end of 2017, the mortgage stock in Kenya was Sh223 billion, equivalent to 2.74 per cent of gross domestic product (GDP).
This compares poorly to a country such as South Africa that has an outstanding mortgage stock close to a third of her economy at 31 per cent of GDP.
According to NHC, housing mortgage in Kenya remain below its potential with major inhibiting factors including lack of access to long-term finance, high interest rates and high cost of houses.