Kenya Eyes Growth in Affordable Housing  with its State-backed Mortgage Refinancing Company

Kenya Eyes Growth in Affordable Housing  with its State-backed Mortgage Refinancing Company

The President uhuru Kenyatta when he visited Parkroad Estate in Ngara where the Government is building 1,370 houses.

Kenya’s first mortgage refinancing company that will advance cash to financial institutions enabling them to give affordable loans to account holders or members to buy or build homes was launched on Wednesday.

This is part of President Uhuru Kenyatta’s affordable housing plan, which will advance cash to commercial banks, saccos and mortgage companies on a wholesale basis.

“Housing mortgage finance in Kenya remains below its potential,” said President Kenyatta during KMRC’s launch.

To bridge the current housing deficit, in the country, Kenyata said the Government is making deliberate interventions in the housing sector under the Big 4 Agenda, to make it more responsive to the middle and lower income segments of the population.

“The intervention is based on the recognition that reaching the goal of adequate, safe and affordable housing for all, especially the lower income groups, requires fundamental thinking of the traditional approaches used in the past,” said Kenyatta.

He said they expected that KMRC will increase the number of mortgages to over 60,000 by 2022 from a current 26,000.

Affordability has remained a major impediment to growth in the housing and mortgage markets in the country with only 10.2 percent of the urban population in Kenya being able to afford to finance for home ownership according to the Centre for Affordable Housing Finance.

Housing Finance. Mortgage refinancing works by:

  • Borrowers cede their property as security for a long-term mortgage loan,
  • The mortgage liquidity facility will lend its funds to PMLs with the mortgages as collateral,
  • The mortgage liquidity facility provides a bond to private institutions and investors, with the mortgages as collateral, and,
  • Institutions with medium to long-term liabilities buy the bonds at a margin above the usual government securities. On bond issuance, investors are likely to buy into the long-term mortgage-backed bond for 13.9%-14.1%, assuming a 1.0% margin above the minimum of the risk-free rate for a 10-year bond, which currently stands at 12.9% or 13.1% for a 15-year bond.