Homeownership in Kenya has been a farce for most people due to highly varying interest rates and houses priced beyond the reach of most in the formal and informal sectors.
This is why the recently renewed impetus by the government to build 20,000 affordable houses a year and a target of half a million homes in five years is creating a buzz among investors, potential buyers and renters alike.
Under the arrangement, the government has put in place incentives to entice developers and investors to cost houses at affordable prices, on one hand, and sweeten the deal for potential buyers and current renters with capped house prices and flexible low-interest rate mortgage and payment options. So how does it work?
In a case-by-case arrangement, any developer who partners with the government under the Affordable Housing Programme (AHP) and signs to deliver more than 100 units, the government will provide its land for free for the construction of the homes.
The cost of land, which accounts for up to 40 per cent of the final price of a housing unit, will be struck off the chest of the developer.
In addition, approved projects under AHP will have building materials used, zero-rated and the corporate tax of the property developer slashed from 30 per cent to 15 per cent.
The government will also prioritise bulk infrastructure development—roads, sewer lines, electricity — by line ministries for AHP initiatives, reducing the cost of construction per house by up to 25 per cent of the current market rate prices.
“With demand side concerns eliminated and development cost concerns lessened, home ownership will go up,” said David Mathu, National Housing Corporation (NHC) managing director.
“The mismatch has been on what the market suppliers and the general populace can afford.”
Other proposals include the fast-tracking of approved AHP plans to eliminate delays, which serve to increase the cost of construction.
NHC is also putting in place plans to formally adopt low-cost building technologies such as reinforced concrete, prefabricated panels, interlocking bricks, expanded polystyrene panels, precast concrete panels, and fibro cement building techniques for AHPs.
Building experts say these will cut costs by anything up to 20 per cent.
For Buyers
As a buyer, what is in for you? The Housing Ministry has created a database for anyone who is a Kenyan citizen and wishes to buy such houses under an initiative dubbed Boma Yangu.
In the portal, individuals are required to key in their details and choose how they want to contribute towards buying a house either as a single contributor or jointly with a spouse.
The portal also classifies housing projects they qualify for as per their contributions and how to apply for house allocation.
In one of the options for home ownership under the tenant purchase scheme, buyers will be able to move into their houses even before they finish paying.
More than 334,000 Kenyans have registered on the portal already and are actively contributing towards home ownership. Many Kenyans have already bought units.
Through the Kenya Mortgage Refinance Company and private investors, banks and Saccos will offer affordable fixed mortgages proposed at nine per cent as opposed to the current 13.5 per cent on the minimum.
Already private investors and banks have pledged Sh1 trillion towards the actualisation of this new financing model.
First-time home buyers under the affordable housing scheme will also no longer be required to pay stamp duty, which ranges between two per cent and four per cent of the total cost of the house for rural areas.
These measures have whetted the appetites of developers seeking a piece of the pie of the AHP.
Jackson Wanjala, a real estate consultant at Kings Serenity — the developers of a housing project launched recently by President William Ruto in Rongai — is upbeat.
“The initiative is a good one as the government offers a ready clientele under the Boma Yangu database. We have easy access to a pool looking to buy,” he said.
“On the part of developers, the terms of engagement reduce costs of construction leading to fairly priced houses.”
Another developer, Peter Kabugi of Crystal Pearl Real Estate welcomed AHP as it comes with solutions to bottlenecks that have hindered affordability, meaning fewer sales, as the units end up being priced out of the bracket that the market can afford.
“The initiative solves financing on the demand side while addressing concerns of developers on costs especially on building materials, cost of land and taxation. The costs are taken off the shoulders of the developer leading to units that buyers can afford while still guaranteeing profitability to the developer,” he said.
Mr Kabugi is on his sixth project on Waiyaki Way in Nairobi.
“This is what the market needed. Finally, there’s a chance at real home ownership,” he says.
His other project of 35 units in Kitusuru is also modelled along affordable housing guidelines with flexible payment details.