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Pension-backed housing only days away

REAL ESTATE
By Vivianne Wandera | September 30th 2021
Housing PS Charles Hinga (centre, Centum Real Estate Managing Director Samuel Kariuki (right) and President's Technical Assistant Mutahi Ngunyi during the groundbreaking of an affordable housing project at Mwiki, Nairobi. [Standard]

Kenyans will in the course of October be able to withdraw up to 40 per cent of the money they have contributed to pension schemes to buy homes.

This follows a change in the law, which now allows partial withdrawal of the pension savings. Previously, one could only access pension funds on retirement or some of it after leaving employment.

Housing Principal Secretary Charles Hinga said in a bid to promote home ownership in the country, the law will allow Kenyans to access their pension money before retirement in order to purchase affordable homes.

“We are doing this because it doesn’t make sense for people to own homes when they are about to retire,” said Hinga during the groundbreaking of an affordable housing project in Mwiki, Nairobi, on Tuesday.

“We want Kenyans to own homes when they are still young, which will also allow these homes to appreciate in value.”

The housing in Mwiki is being undertaken by Centum Real Estate, a subsidiary of Centum Investments.

The National Treasury last year gazetted the Retirement Benefits (Mortgage Loans) (Amendment) Regulations, 2020,  which amended the Retirement Benefits Authority Act (1997), enabling Kenyans who have been saving for retirement through pension schemes to  access a portion of their savings to purchase residential houses.

One can access 40 per cent of their pension savings but up to a maximum of Sh7 million.

“The proportion available for the purchase of a residential house shall be 40 per cent of accrued benefits provided the sum shall not exceed Sh7 million or the purchase price of the house,” the regulations say.

The housing project, being executed under a public-private partnership, will construct 284 housing units for sale at between Sh2.8 million and Sh5.4 million.

Affordable housing is one of the pillars under President Uhuru Kenyatta’s Big Four Agenda. The others are job creation through manufacturing, food security and universal healthcare.

Kenya’s population growth is estimated at an annual rate of 8.3 per cent, coupled with one of the fastest urbanisation rates of 4.5 per cent, which has led to demand for affordable housing, infrastructure and related amenities.

As of 2017, there was an 80 per cent deficit in Kenya’s annual housing with demand of 250,000 against estimated supply of 50,000. The current cumulative housing deficit is approximately 1.8 million houses.

The deficit is said to be caused by the fact that developers focus on the upper middle class, causing an acute shortage for Kenyans in lower income areas, with the quality of houses available in these areas not being up to par.

According to the Housing ministry, Nairobi residents spend more than 40 per cent of their income on rent with the rental market accounting for 91 per cent of available supply.

Mr Hinga said housing has created jobs for Kenyans both directly and indirectly. “When we did our design, we estimated that for every housing unit we will be creating five new direct jobs and about eight indirect jobs,” he said.

“We took a house and disaggregated it into components and with 500,000 homes we know we will require 44 million bags of cement. We are now producing eight million tonnes of clinker locally and we no longer need to import it, meaning more people will be employed from truck drivers to handymen.”

The PS said the government is giving incentives to private partners to ensure that the benefits get to buyers. Various partnerships have ensured that the some of the land is made available to Kenyans at no cost.

“The Park Road housing project (at Ngara, Nairobi) is a different model as the land belongs to government and we got an investor who built, and once they had finished we paid them and sold the houses,” he explained.

“This translates to a three-bedroom unit at Park Road going for Sh3 million while it is going for Sh7 million in other places. This means the subsidies the government has put in place for affordable housing have cut the prices by more than half.”

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