During this year’s budget reading, Treasury Cabinet Secretary Ukur Yatani announced a Sh27.2 billion allocations for new affordable housing units to serve middle and lower-income families in urban centres, major towns, and cities.
This is in addition to the Sh37.3 billion allocated to the Affordable Housing Programme, whose mandate is the construction of new units as well as the facilitation of a mortgage-led housing plan through the Kenya Mortgages Refinance Company (KMRC).
The company is tasked with funding banks to offer ‘capital’ specifically to local lenders, who will, in turn, issue single-digit interest rate loans to first-time home buyers.
The Housing Ministry opines that the provision of new houses is skewed toward high and upper-middle-income households, with only 15 per cent going to lower-middle-income households and only two per cent going to low-income households.
KMRC is set to receive Sh4.6 billion from the national budget in the coming fiscal year to help Kenyans buy houses priced at between Sh1 million and Sh3 million built on government land by select housing investor-developers.
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This enables financial institutions such as Absa Bank to act not only as mortgage lenders but also to fund housing developers who build units for sale.
The inclusion of local lenders in financing various mass housing projects stems from the State’s commitment to open up the sector to more players, thereby expediting project implementation across the country.
For example, we have partnered with the National Housing Corporation to implement various housing projects.
Our participation in housing development projects will result in faster project implementation and will inform off-plan purchases from their customers.
The bank is among the local lenders that have proposed customised mortgage products that speak to their customers’ individual abilities and needs.
Among them are rent-to-own and tenant-purchase schemes, which attract buyers with attractive terms based on a 25-year repayment plan.
The involvement of local lenders also activates a ready-to-use end-user platform that customers can use as a one-stop-shop facility for the acquisition of decent housing units.
Lender involvement in the housing development market will be a game-changer for Kenya’s mortgage sector, which has only 26,971 active mortgages in a country with a working population of about 22.3 million.