Housing Finance plans to slash home loan rates to entice low income earners

 

HF yesterday announced that it will start offering mortgages at 10 per cent, which is below the market rate of 14 per cent to stimulate uptake.

The mortgage financier, which controlled about 24.3 per cent market share in 2015, yesterday said it was developing a product that will allow prospective homeowners access funding of between Sh1.5 million and Sh4 million under the preferential terms.

“It is one of the things we are doing to help with the development of affordable housing. We are already talking to a number of impact investors to create the fund for lending to customers,” Managing director Frank Ireri.

HF hopes to raise about  USD 100 million for the exercise and has already approached local and international financiers for partnerships.

“The idea is to keep mortgage repayment as low as possible and closer to what the prospective customers are now paying as rent in order to convert as many rent payers as possible to homeowners.”  Ireri  told a local daily

The fund is expected to be rolled out mid next year.

The average size of a mortgage loan has been steadily rising in line with increasing value of houses and land, a development that has locked out majority of borrowers from accessing loans to build homes.

Average mortgage rose to Sh8.3 million in 2015 from Sh7.5 million in 2014 according to the Central Bank of Kenya.

There is a huge house deficiency in Kenya, in 2013 for instance, only 15,000 houses were planned and approved for building, against an annual demand of 200,000 housing units, property firm HassConsult revealed.

Poor financing, bureaucracy, corruption, interest rates and high incidential costs accrued from valuation and legal fees are but just but a few issues which has continue to dogged the real estate market .

The housing deficit has been further worsened by developers concentrating on high-end segment to reap maximum returns.

Currently, more than 80% of new houses produced are for high and upper middle-income earners, yet the greatest demand is for the low and middle income bracket, which represents 83% of the population

The end result is the sprawling of slums around Nairobi city like Kibera slum, which hosts about 350,000 people or about a fifth of Nairobi’s population.

All is not gloom though, opportunities for the development of housing for this income bracket can be realised in satellite towns which registered the highest growth last year spurred mainly by mega projects according to HassConsult.

Last week the World Bank, valued the Tanzania’s capital, Dar es Salaam’s real estate industry at Sh1.2 trillion ($12 billion) ahead of Nairobi’s Sh927 billion ($9 billion) – a Sh273 billion gap.

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