Participating lenders will receive government funds raised for the housing project, which they will charge an interest rate of between five to seven per cent.
Kenya has about active 24,000 mortgages which is far too low, largely blamed on stringent conditions and high charges imposed by banks.
The situation has also been worsened by interest rate capping at 13.5 per cent that saw most banks shun disbursement of long-term loans to people considered as a high risk.
Banks seeking to offer low-interest mortgages under the tenant purchase scheme (TPS) intended to spur uptake of the planned 500,000 housing units are set to get incentives to charge as low as five per cent on home loans.
Transport, Infrastructure and Urban development secretary James Macharia said participating lenders would receive government funds raised for the housing project, which they will charge an interest rate of between five to seven per cent.
“We shall provide the land and fund construction of the houses through the National Housing Development Fund. Banks will then create demand among Kenyans by charging friendly interest rates,” he said.
Speaking when he met bank representatives in Nairobi, Mr Macharia said the government and development partners had set aside Sh30 billion for the housing projects but needed to engage local banks to administer the funds on its behalf.
“Fifty-nine projects are planned for execution across Kenya where developers hired by the government will develop mini-cities comprising of high-value and low-value houses, retail areas as well as schools and be paid upon completion,” he said.
Participating banks will also get land — normally accounting for 30 per cent of the house value — to put up high-value houses for sale to recoup the investment, in return for taking up management of the low-cost housing units developed on the remaining parcel of land.
Kenya has about active 24,000 mortgages which is far too low, largely blamed on stringent conditions and high charges imposed by banks. The situation has also been worsened by interest rate capping at 13.5 per cent that saw most banks shun disbursement of long-term loans to people considered as a high risk.
To reduce the cost of houses to between Sh1 million-Sh1.5 million, the minister said the government would facilitate the provision of essential infrastructure such as roads, water and electricity.
Mavoko sub-county has been identified as home to the first mass housing project that will accommodate 8,000 low-cost houses on a 55-acre piece of land.
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