7 million Kenyan families locked out of home loan

Money Markets

From left: HassConsult research and marketing manager Sakina Hassanali, Hass Index consultant Jenny Luesby and The Mortgage Company MD Carole Kariuki when they unveiled Hass Property Price Indices for the first quarter of 2014 at Hilton Hotel on Thursday. Photo/Billy Mutai 

By CHARLES MWANIKI, cmwaniki@ke.nationmedia.com

In Summary

• A report The Mortgage Company says only a fifth of Kenyans living in urban areas can afford a home loan priced at Sh1 million and above.
• At least a quarter of Kenyans live in urban areas, meaning that out of the country’s nine million households only two million can afford a Sh1 million mortgage.
• Pricing has been identified as the biggest obstacle to working families accessing house loans forcing them to live in rented units.

High cost of money and low incomes have locked a large fraction of Kenyans living in urban areas out of the home loans market limiting its growth, a newly released real estate sector report says.

The report, which is the product of a survey by The Mortgage Company (TMC), says only a fifth of Kenyans living in urban areas can afford a home loan priced at Sh1 million and above.

At least a quarter of Kenyans live in urban areas, meaning that out of the country’s nine million households only two million can afford a Sh1 million mortgage.

The real estate market survey found that at current interest rates half of Kenya’s urban families cannot service a Sh700,000 mortgage casting a dark cloud over the market’s growth.

TMC, a realtor, said the findings of the survey, which also indicate that the total number of home loans in Kenya now stands at 20,000, making the government’s ambition to increase the number to one million a herculean task.

“It certainly cannot be done under the current financing regime,” said TMC managing director Carole Kariuki.

A Central Bank of Kenya (CBK) committee that was formed at the beginning of the year to investigate the low uptake of mortgages in Kenya despite high demand for housing has yet to release its report.

Pricing has been identified as the biggest obstacle to working families accessing house loans forcing them to live in rented units.

READ: High price of land in Nairobi denies residents homes

Kenya has a high interest rates regime that has seen spreads stay at between 13.9 per cent and 19 per cent in the past 12 months.

Ms Kariuki said that mainstream lenders’ insistence on such high margins of lending has delayed the take-off in Kenya’s mortgage market, distorted the housing range, discouraged private developers and locked out all but the elite from home ownership.

Given the current price range of most new housing units in Nairobi, just one per cent of urban families can afford a Sh5.7 million mortgage.

Another four per cent can service a Sh3.9 million home loan, meaning only five percent or 160,000 Nairobians can buy a home priced at Sh3.9 million and above.

That number is less than a quarter of the government’s one million mortgages target.

“Even the much-touted Sh1 million houses are hardly affordable to many families at current mortgage rates,” Ms Kariuki said, adding that only 20 per cent of Kenya’s urban dwellers can service a Sh1.1 million home loan.