Members of the public outside National Social Security Fund (NSSF)
offices in Mombasa. The Treasury hopes to boost mortgage access by
allowing NSSF to lend members. PHOTO | KEVIN ODIT
By KIARIE NJOROGE, gkiarie@ke.nationmedia.com
In Summary
- Treasury has exempted the NSSF from a requirement that bars pension schemes from putting their money in financial institutions with the aim of securing preferential interest rates for their members.
- The pension scheme is now free to put a portion of its assets in financial institutions for onward lending to its 3.9 million members at a rate not specified by Mr Rotich.
Members of the National Social Security Fund (NSSF)
will start receiving cheap mortgages after the Treasury allowed it to
offer home loans through commercial banks.
Henry Rotich, the Treasury Cabinet Secretary (CS) in a legal
notice exempted the NSSF from a requirement that bars pension schemes
from putting their money in financial institutions with the aim of
securing preferential interest rates for their members.
This means that the NSSF is now free to put a
portion of its assets in financial institutions for onward lending to
its 3.9 million members at a rate not specified by Mr Rotich.
The fund has more than Sh10 billion in banks and
collects Sh9.2 billion from its members annually—making it one of the
wealthiest State controlled corporations.
“The Cabinet Secretary for the National Treasury
exempts the National Social Security Fund from compliance with the
provisions of Section 38 (1) (c) of the Act for the purpose of investing
through a prescribed institution in affordable housing for the members
of the Fund,” Mr Rotich says.
The exempted section bars pension schemes from
investing their funds in banks, non-banking financial institution,
insurance company among.
The exemption will allow NSSF to use cash in banks
for onward lending to its members at a rate analysts reckon would be
between six and nine per cent based on similar arrangements in corporate
Kenya.
Under the deal, the NSSF will receive interest from
the cash deposit placed in banks while the lender will get a fee for
administering the mortgage scheme on behalf of the fund for its members.
In corporate Kenya, companies with staff mortgage
schemes get interest of about four per cent on their deposits while the
banks earn a fee of about three per cent.
This allows them to offer mortgage to the staff at
about seven per cent—which is lower compared to the average home loan
rates of 17.5 per cent.
The Treasury hope the NSSF move will help low
income earners access mortgages and help bridge the housing deficit,
especially in the bottom segment of the market.
Kenya had about 24,500 mortgage accounts last year
with high interest rates, expensive houses and upfront costs such as
legal fees, valuation fees and stamp duty cited as major impediments
for home loans uptake.
The lack of affordable mortgage products has seen
most people opt to pay cash for a house or buy land and build houses
over a period of time.
The average size of mortgages stood at Sh7.5
million in 2014, making it difficult for a majority of Kenyans to own
homes financed by commercial banks. Mortgage lending increased last year
by nearly a fifth to Sh164 billion.
The NSSF has preferred to build homes for sale under terms that have seen dozens of units snapped by wealthy individuals.
Its houses are available to cash buyers and tenant purchase
scheme (TPS) applicants who raise a 10 per cent deposit and become a
tenant buyer.
But the fund has preferred those who could pay the full amount. This has skewed allocations in favour of the wealthy.
In 2014, property accounted for 27.3 per cent or Sh38.6 billion of its Sh144.4 billion
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