Kenyans earning KSh150,000 and below monthly will start getting house loans from local banks and SACCOs at an annual subsidised interest of 7 percent lower than the market rate of approximately 13.0 percent.
The Kenya Mortgage Refinance Company (KMRC) said it will begin lending in September 2020, following approval to operate by the Central Bank of Kenya.
Prospective homeowners will qualify for mortgages of up to KSh 4 million with a repayment period of up to 20 years. This will commit the buyer to a monthly repayment of KSh31,000 for 240 months, down from KSh46,863 on the prevailing market rates.
KMRC is 20 percent owned by the Kenyan government with 11 deposit-taking SACCOs, eight commercial, and one micro-financial institution holding a shared 80 percent stake. Its board of directors has been in place since July last year.
KMRC has currently mobilised KSh40 billion, including KSh2.2 billion in equity capital, KSh25 billion committed by the World Bank and KSh10 billion from African Development Bank (AfDB).
KMRC will feed the banks with long-term funding, reducing the lenders reliance on short term loans.
The facility aims to grow the number of mortgage accounts to 60,000 by 2020.
“However, with the value of outstanding non-performing mortgages at Kshs 27.3 billion as at 2017, we are of the view that the Kshs 40 billion will be a one-off and thus the 7.0 percent interest rate will not be sustainable once the initial capital is exhausted and the facility will need to move back to the market rate of approximately 13 percent,” comments Analysts from Cytonn Real Estate.
Cytonn expects that the operationalization of KMRC will resolve some of the challenges that have led to the low uptake and access to mortgages in the country, thus improving its penetration rate which stood at 3.2 percent of gross domestic product (GDP) as at 2017.