KCB #ticker:KCB has emerged as the largest financier of home buyers in Kenya with Sh54.3 billion in outstanding loans, according to the latest official data.
The bank had 6,496 mortgage accounts at the end of December 2016 during which the average home loan size rose by Sh1 million to stand at Sh9.1 million, according to documents on the planned Treasury-sponsored home loans refinancing company.
The value of home loans issued by all banks stood at Sh200 billion at end of 2016, representing a paltry 3.2 per cent of the gross domestic product (GDP).
At 3.2 per cent the proportion of Kenya’s mortgage market to the GDP stands at a tenth of South Africa’s, which is more than 30 per cent of GDP.
The Treasury reckons that the low uptake of home loans in Kenya is mainly linked to the high cost of homes, which rose from an average of Sh8.3 million in 2015 to Sh9.1 million currently.
“The average bank mortgage of Sh9.1 million would only be available to a very small percentage of the population,” said the documents setting the stage for the establishment of the Kenya Mortgage Refinance Company (KMRC).
“The monthly instalments for the average mortgage in Kenya is more than Sh100,000, making it impossible for most people to afford it. Again you don’t want someone to spend more than a third of their income on mortgage,” said Faith Mwangi, an analyst with Exotix Capital, a UK investment bank with an office in Nairobi.
The Kenya National Bureau of Statistics 2016 survey found that only 74,293 Kenyans earn more than Sh100,000, meaning that the rest of the population would not qualify for the average mortgage offer from commercial banks or established financiers.
The new mortgage refinancing firm is intended to enable Kenyans earning less than Sh100,000 qualify for home loans.
Housing Finance Company #ticker:HFCK is the second largest home loans financier, with Sh51.8 billion arising from 5,711 accounts.
The bank, however, had a bigger pile of non-performing loans (NPL) worth Sh5.862 billion or 11.3 per cent of the portfolio at the end 2016 compared to KCB’s Sh3.6 billion.
Collapsed Chase Bank is listed among the top 10 mortgage lenders with a Sh7.24 billion loan book. A whopping Sh4.586 billion of the total loan book or 63.4 per cent is non-performing, meaning that most of the mortgage borrowers are in default.
Ms Mwangi recommended that banks vary the type of loans on offer and be less discriminative on locations where they can finance home buyers to increase the amount lent under their mortgage lines.
“The classification of houses needs to be extended. It should not be just mainly people who are buying. There should be more offers for people who have land and want to build on it. Again, many banks want to finance only homes in certain locations, say Nairobi, but there are opportunities elsewhere,” said Ms Mwangi.
The Treasury document says that the KMRC will offer longer-term loans to financial institutions for on-lending to customers, but will also refinance existing mortgages to free up cash for more loans.
This would constitute a secondary market for loans that were generated by a particular bank or sacco at the initial stage.