Housing Principal Secretary Charles Hinga broke down how Kenyans will be able to opt-out the proposed Housing Fund Levy.
Housing Levy: PS explains 14-year waiting period to access full contributions
Housing PS clarifies why Kenyans who opt out of the housing program will only receive half of the cash after 7 years and the rest after another 7 years
The fund requires all employees to contribute 3% of their monthly salary. Every employee who contributes 3%, to their employer will also contribute 3% to the housing kitty.
In a press briefing at State House on Wednesday, May 24, he explained that while the government will prefer that Kenyans use the money as deposits of their new homes, there will be a two-level exit process for those who would rather cash out.
He explained that for those in employment, the housing levy is a sweet deal because, for every coin they save, their employers will have to match it, meaning employees’ savings on the fund will double.
For example, the highest earners will contribute Sh2,500 per month and their employers will top up Sh2,500.
According to the average salary in Kenya, many will contribute Sh1,000 which will double to Sh2,000 after their employers match the contribution.
After seven years, the highest earners will have accumulated Sh420,000 while the average Kenyan will have accumulated Sh168,000.
2-part cash out process
According to PS Hinga, this money will be able to serve as one’s deposit for the housing units and the owners will continue paying affordable rent while living in the unit until they clear the 5% mortgage.
However, if one opts to exit the fund after seven years, they will only receive their half of the contribution, while the employer’s portion will remain with the Housing Fund.
This means the top earners will receive Sh210,000 while the average Kenyan will receive Sh84,000.
PS Hinga explained that this will help the Housing Fund not to default on any obligations.
“If you want to get it out, you will get out your portion. The employer portion stays in because the employer portion is the one that protects the capital of the fund, so that if now there are obligations for the fund, we are supposed to keep that kind of money,” he said.
He further explained that for an employee to receive the remainder of the money, they will have to wait for seven more years.
"After 14 years you can now exit your employer portion as well," he added.
Kenyans who will not be subjected to the 14-year wait period are those who retire before the time lapses of die. The benefits can be conferred to a next of kin.
In making a case for the affordable housing project, PS Hinga said the units provided by the government will be cheaper by 60% than those sold by private developers.
He said that Kenyans who are not formally employed will also get a chance to participate by saving voluntarily.
Watch the video of PS Hinga explanation below
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