Rebooting Kenyans' access to affordable housing schemes
By Susan Mucheke
| September 9th 2021
Most Kenyans lack decent housing. According to the Kenya National Bureau of Statistics, only 23.1 per cent of urban dwellers own a house.
Several initiatives to close the housing gap have been mooted, including the recent amendment to the Retirement Benefits Act-Mortgages Provision aimed at pooling in the pension sector savings to empower Kenyans to acquire homes.
Enwealth Financial Services Mortgage Officer Susan Mucheke talks to Real Estate about these initiatives.
Are there practical steps by the government to make housing affordable?
Yes, most notably, the establishment of Kenya Mortgage Refinancing Company (KMRC) and an amendment to the Retirement Benefits Act. In partnership with the World Bank, KMRC lends to financial institutions at five per cent, allowing them to write home loans at seven per cent compared to the 13 per cent market rate.
The Retirement Act was amended to allow individuals to utilise 40 per cent of pension savings for the purchase of a residential house or 60 per cent as mortgage security. Other initiatives include stamp duty waivers for first-time homeowners and the National Housing Development Fund (NHDF) solutions like the tenant purchase scheme.
Are there indications of public-private partnership to bridge the housing gap?
With a bold 500,000 units promise in 2017, the government has only delivered 228, hence the need to fuel buyers and developers alike. Corporate tax on developers has been slashed by 50 per cent. In addition, inputs for affordable housing construction are now exempt from value-added tax (VAT), approval fee such projects waived.
These are immeasurable enticements for private developers to get on board. In the pension space, it will be mostly the private players to take advantage of the pension-backed mortgage provisions to bring savers to the homeownership bracket.
Do we have a benchmark for the pension-backed mortgage system?
The provision to allow pensions scheme members to utilise part of their retirement savings to acquire homes has been widely successful in other parts of the world.
For instance, in Singapore, employees are part of a mandatory Central Provident Fund in which their pension contributions are separated into ordinary account (housing, insurance, education), a special account (for investing at old age), and a Medisave account (for medical insurance and hospitalisation expenses).
The fund thus allows 23 per cent of the ordinary account contribution to be used to pay for a house. This structure has seen the country record a 90 per cent homeownership rate, one of the highest in the world.
How impactful are these solutions? Are they sustainable in the long term?
With adequate drive from policymakers and comprehensive efficient urban planning, the programme is destined for success.
I believe that if we remain consistent with the improvements of our policies, implement them and utilise the available resources well, we have the potential to reach levels of Singapore, Netherlands and the likes.
The private sector players are also complementing each other to meet this goal. Enwealth Financial Services has partnered with Co-op Bank to avail access to its members.
Can we hope for further legal amendments to facilitate homeownership?
Although the shovels are well into the ground, they can dig deeper by bringing on board more real estate developers and mobilising commercial financing in the capital markets. The amended Retirement Benefits Act, for example, is limiting institutions where pension savers can buy a house.
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