There’s a cheaper way to own a home

Owning a home has been an elusive dream for many Kenyans due to the high costs involved. But this is set to change because of the entry of micro finance institutions into the mortgage arena.

These new entrants have come with better rates and flexible payment arrangements compared to what is being offered by the big banks or established mortgage institutions.

With these new entrants, one does not have to go through the arduous procedures set by mainstream lenders before you get your loan. In fact, low income levels or lack of credit history by a borrowers are no longer a hindrance to owning a home.

Chase Bank’s subsidiary, Rafiki, recently joined other microfinance institutions; Jamii Bora and Select Africa to sell home loans to workers in the informal sector and salaried low income earners.

Rafiki’s entry comes a year after Jamii Bora Bank unveiled its home loan product targeting buyers into housing estates developed by its subsidiary, Makao.

With Rafiki’s offer, for instance, one can own a home built using new technologies at a cost of between Sh1 million to Sh3 million, payable over a 10-year period.

This means buyers of the cheapest house would pay a monthly mortgage of about Sh19,000 for 10 years.

The loans will be priced at 18 per cent on a variable interest rate schedule. This is unlike the average 23 per cent interest charged by banks.

Rafiki plans to finance 100 per cent of the construction costs for individuals with land, and an additional 70 per cent of the cost of land for people who do not already have land.

According to George Mbira, a real estate development expert and General Manager at Rafiki Data Taking microfinance , the appraisal of customers by microfinance institutions is different from that of banks.

“For micro-finance institutions, household income forms the integral part of the loan appraisal while other mortgage firms use conventional tools such us audited accounts, pay slips and bank statements to account for turnovers,” explains Mbira.

Incremental mortgage

Mbira says Rafiki DTM offers incremental mortgage plans where a customer build their home in phases which may start with the acquisition of land and gradual construction as cash flow allows.

“We also finance stand alone houses up to Sh3 million with an interest range between 18 and 27 per cent depending on which plan the customer undertakes,” he says.

Keen to meet the ballooning demand for home ownership, Select Africa, a subsidiary of African Alliance, also entered the Kenyan housing sector early last year.