The National Treasury is supporting the affordable housing agenda by facilitating the creation of a mortgage liquidity facility in Kenya, the Kenya Mortgage Refinance Company (KMRC).
Affordability is a major constraint to the growth of the housing and mortgage markets in the country and a key challenge to access to decent housing.
Speaking on Wednesday during a stakeholder engagement meeting on the formation of the KMRC, Treasury Cabinet Secretary (CS), Henry Rotich said with a GDP per capita of Sh 292, 500 (USD2,925) per annum as of 2016, few Kenyans could afford homes built by formal developers resulting in mortgage lending being accessible to only a minority of the population.
He added that the average bank mortgage of Sh9.1m would only be available to a very small percentage of people.
It is no surprise that only about 26.1 percent of Kenyans in urban areas were residing in their own dwellings according to a 2015/16 survey by KNBS, he said.
Kenya, with a population of over 46 million people, faces a critical shortage of housing units and according to conservative estimates, there is already a backlog of 2 million housing units, and the backlog increases by 150, 000 units every year due to various factors including the limited availability of mortgage finance and developer finance.
Kenya is also facing high rates of urbanization and population growth and although only 32 percent of the population lives in cities today, the figure is expected to grow to 50 percent by 2050 according to UN Population Division (2014).
The CS said that the purpose of establishing KMRC was to offer the housing finance market in Kenya a credible, professional and high quality large scale medium- to long-term refinance.
This type of institution, he added, has proven to be an important factor in the launching, growth and success of mortgage finance markets in other emerging countries.
KMRC would serve as a secure source of long term funding at attractive rates while ensuring sound lending habits resulting in greater availability of fixed rate mortgages, and longer available loan terms, Rotich said
KMRC, he explained, would be set up as a Limited Liability Company incorporated under the Companies Act and would be a newly created, non-bank financial institution restricted to providing long-term funding and capital market access to mortgage lenders and issuing bonds to investors.
As a wholesale secondary market institution, it will neither take deposits nor lend directly to individual borrowers. The company will be subject to regulation and supervision of the Central Bank of Kenya (CBK) with CMA providing oversight over its bond issuance operations, the CS said.
He reiterated that the National Treasury is committed to providing strong support to KMRC during its early years in order to assist the Company achieve long-term sustainability. Thus, it will have equity capital contributions from the government and some international financial institutions that have already committed to support the government on this initiative, he said.
The CS encouraged stakeholder to subscribe to the Company’s equity capital in order to benefit from KMRC’s services including access to affordable long-term funding at fixed price, as in mortgage refinance companies in other countries.
Rotich said they were reviewing the interest rate capping law and would consider replacing it with a comprehensive legal framework to address shortcomings in the credit market.
The Treasury has prepared an information document which provides details on the establishment of KMRC and targets to have the company fully incorporated by end of April this year.
The Kenya Bankers Association (KBA) CEO, Dr. Habil Olaka said the support from the industry towards Kenya Mortgage Finance Company would go a long way in supporting government’s initiative in term of the ‘Big Four’ agenda.
The Principal Secretary of Housing, Charles Mwaura said that in the coming week, the Government would be releasing 60 projects at once to the market through the Kenya Urban Support Programme.
Forty five of them, he said, were going to be at the County Headquarters and with government providing funding to upgrade urban infrastructure, the Counties would be required to identify land in their areas or even old estates and bring it as part of the package.
We will require them to identify land or old estates and to forward it as part of the package so that even as we invest in infrastructure, that is the land we target for building the houses, Mwangi said, noting that Mombasa and Nairobi have different programmes.
The Government has outlined four key priorities (The BIG 4 agenda) for implementation over the next five years that include raising the share of manufacturing sector to 15 percent of GDP; ensuring all citizens enjoy food security and nutrition; achieving universal health coverage and delivering at least 500,000 affordable housing units in major cities around the country by 2022.
Source: Kenya News Agency