State eyes Sh10,000 a month mortgages


The Ongoing construction of Affordable Housing at Buxton in this photo taken on October 12, 2022. PHOTO | KEVIN ODIT | NMG

The government has set its sights on an ambitious overhaul of the housing and mortgage market with a plan to bring down the cost of mortgage instalments to just Sh10,000 a month.

The move is centred on guaranteeing buyers for developers of homes constructed under the affordable housing scheme.

By assuring takers of affordable homes, the government is betting on the intervention to grow the number of mortgage accounts in the country from 30,000 to one million by trimming financing costs.

“As part of the process, the government will restructure affordable long-term housing finance scheme, including a National Housing Fund and Cooperative Social Housing Schemes that will guarantee offtake of houses from developers,” the National Treasury said.

“This plan is expected to create quality jobs for 100,000 youths, employing graduates from TVETs, directly in the construction sector and indirectly through the manufacturing of building products every year.”

The new administration has envisioned delivering at least 250,000 houses per year to bridge the housing gap.

While the new administration, like the old shares in enlisting housing as a key pillar in its development agenda, the pair differs on the financing model to be deployed in bringing down the cost of housing.

The Uhuru Kenyatta administration had for instance backed a plan to bring cheap long-term financing to primary mortgage lenders through the creation of the Kenya Mortgage Refinancing Company (KMRC).

KMRC which was founded in 2020 has nevertheless failed to have a profound effect on both the cost and volume of mortgages issued by banks and other financiers as the cost of home ownership remains largely out of reach for the majority of the population.

During its first year of operation in 2021, KMRC disbursed loans totalling Sh1.3 billion to primary mortgage lenders.

Data from CBK and banks show the average mortgage in the market at the end of 2021 had a value of Sh9.2 million with a tenure of 12 years.

The mean mortgage attracts monthly payments of between Sh118,065 and Sh150,137 with the monthly instalments being untenable for many.

Under the previous administration, the government had set its sights on constructing 500,000 affordable homes over a five-year period to 2022.

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