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Over 70pc of Kenyans finance homes from personal savings

By Nicholas Waitathu | Feb 12th 2015 | 2 min read
By Nicholas Waitathu | February 12th 2015

Kenya: Over 70 per cent of Kenyans finance construction and acquisition of their homes through personal savings, a newly released housing price report indicates.

The Kenya Bankers Association (KBA) Housing Price Index (HPI) says only 28 per cent of Kenyans finance homes and acquisition using bank loans, out of which only six per cent prefer mortgages.

“Aspiring homeowners term mortgage as an expensive avenue and instead finance construction with loans from Chamas, Savings and Credit Co-operative Societies (Saccos). A few opt for normal banking loan while others inherit or given as gifts,” adds the report.

Director of KBA Centre for Research on Financial Markets and Policy Jared Osoro said while 72 per cent of Kenyans finance homes from personal savings, mortgage numbers have increased from 13,800 in 2011 to 20,000 in 2014.

“Mortgage and home loan use are low for they are considered expensive. Banks are estimated to have contributed 28 per cent of home ownership financing (mortgage or loan or both),” he said during the launch of the report at a Nairobi hotel yesterday.

Osoro said homeowners being averse to mortgages is not only on account of limited awareness but also due to perception that this funding option is expensive.

A number of people, he pointed out, are also keen to own houses over a short period of time and do not want to be tied on long term relationship with financiers.

“Mortgage terms are also perceived to take long before one completely owns a home. Most mortgages are repaid in 15 years or more. A good number of homeowners do not know how mortgage works,” he explained.

High interest rates

He said 80 per cent of potential homeowners also complain of high interest rates while 40 per cent decline to take mortgage, criticising the long process involved. Osoro said only 18 per cent of urban dwellers owns homes they live in while majority live in rented houses.

Kenya Bankers Association Chief Executive Offer Habil Olaka said the House Price Index would serve two critical roles. He said it would be a useful risk management tool for the financial market players and banks in particular who not only finance home development and ownership, but also take such property as collateral for other credit.

“It will also be an invaluable tool to the non-financial sector players – both businesses and households –seeking to invest in the housing industry, “ he added.

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