Banks commit Sh335bn mortgage for low-cost housing scheme

Six banks have committed Sh335 billion in mortgages to fund the Affordable Housing Programme (AHP), lending a major boost to one of President Uhuru Kenyatta’s Big Four economic pillars.

Housing Principal Secretary Charles Hinga said on Thursday the financiers include Equity Bank, KCB, NCBA, Stanbic Bank, Absa and Housing Finance.

The banks, he said, will finance potential home-owners to purchase both government-built houses and units delivered by private developers registered on the Boma Yangu portal.

SIGNIFICANT PROGRESS

“This partnership represents significant progress and will help potential homeowners, especially in the low and middle-income segments, to overcome the financial hurdles to home ownership,” said Mr Hinga in a statement yesterday.

The partnership comes a few days after Mr Hinga asked banks to partner with building contractors and landowners in formulating mortgage products based on financial ability of individuals.

Mr Hinga said the products should reflect a rent-to-own arrangement that Kenyans understand and can take up with ease.

The support by commercial banks comes at a time the state has failed to allocate cash for civil servants’ housing scheme for the second fiscal year in a row.

ACCESS TO LOANS

Treasury had initially pegged its hope on the national budget-funded civil servants housing scheme to boost access to loans for its workers who were to continue paying their mortgage up to five years after the retirement age of 60.

The state has also been pushing to build a national housing development fund to finance low-income Kenyans aspiring to own houses.

Mr Hinga said the government’s role was to facilitate construction of affordable properties that Kenyans can buy by removing taxes and fast-tracking building approvals, among other tax reliefs to first-time home buyers and developers.

He notes that for potential home buyers, the government will offer partial credit guarantee that will cover up to 20 per cent of approved loans.

“The partial credit guarantee will derisk potential home buyers and enables the self-employed and especially informal business owners to access bank mortgages that they typically wouldn’t access,” he said.

CREDIT GUARANTEE

To date, more than 300,000 Kenyans have registered for the AHP on the Boma Yangu portal, with more than 25,000 active contributors.

All registered members who have contributed the minimum 10 per cent of the value of the houses they are interested in will qualify for allocation of the units.

These members will directly benefit from the partial credit guarantee to access mortgage finance from the six banks subject to the respective credit approval processes.

Under the AHP, fist-time homeowners are not required to pay stamp duty and would benefit from an affordable housing tax relief of up to Sh9,000 per month.

The tenant-purchase scheme arrangement, however, allows for multi-generational payment plans and years to retirement are not considered as would be the case when applying for a traditional mortgage.