Mortgage industry pushes for more incentives

By Jackson Okoth

Expectations are high within the mortgage industry that this year’s budget will contain incentives to encourage people to own homes.

"We are anticipating the budget to give more tax breaks, especially for those in the low-income bracket. We also hope there will be tax exemption on inputs used in the construction business, said Frank Ireri, the managing director Housing Finance (HF).

He made these remarks Wednesday in Loresho Nairobi, during the handing over of Waterfront Gardens Estate to HF by its owners Hewton Limited, a subsidiary of Cooper Kenya Limited.

Central Bank of Kenya (CBK) Governor Njuguna Ndung’u, officiated over the function.

The mortgage lender is also expecting the Finance Bill 2010 to provide it with certain exemptions to unable it compete with other financiers in the home ownership business.

"We have put forward proposals aimed at creating a level-playing field between us and commercial banks," said Ireri.

The mortgage industry is seeking for more relief on mortgage interest as well as more incentives for those saving to buy a house.

The industry has called for stamp duty concessions for first time homeowners constructing or buying houses. "There is need for enhancement of mortgage interest relief to increase access to home ownership in the middle lower income market," he said.

Tax relief

A relief of Sh48,000 per year is considered inadequate. The same goes for Sh150,000 as tax relief on owner-occupier mortgages.

The Waterfront Gardens Estate will have 208 units when complete.

The first phase of 45 units sold out to buyers who mostly paid cash for the houses. The second phase handed to HF yesterday, is ready for occupation and targets the upper middle class. One four bed-roomed house goes for Sh13.5 million, including a servant’s quarter.

"Due to lack of infrastructure, the firm had to invest in basic services that increased the project’s cost by 12 per cent, thus making it expensive for middle income earners," said Mucai Kunyiha, Waterfront Gardens Development Director.

While the estimated annual demand is 150,000 units, the available supply is only 35,000 units.

"This state of affairs is attributed to under-investment in the housing sector, an outdated legal and regulatory framework, land value and scarcity in the urban areas as well as high cost of financing," said Prof Ndung’u. He said the financial sector is yet to achieve optimum financing to the housing sub-sector. This can be illustrated by the lending of commercial banks and mortgage firms to the construction and real estate business.

Room for expansion

Figures indicate that credit to the real estate sector amounted to Sh92.5 billion as at December last year, accounting for 12.2 per cent of total credit.

"Given the excess demand for housing, there is considerable headroom for expansion of credit to support provision of housing," said Ndung’u.