State-backed mortgage firm triples home loans to Sh7bn

KMRC chief executive Johnstone Oltetia. PHOTO | DIANA NGILA | NMG

By CONSTANT MUNDA
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Summary

• The State-backed mortgage refinancing firm will triple affordable home loans to Sh7 billion in the year started July, offering a boost to workers push for house ownership.
• The funds will be offered to banks and savings and credit cooperative society (saccos) this fiscal year, representing a 154.73 percent jump from the Sh2.748 billion a year earlier.

The State-backed mortgage refinancing firm will triple affordable home loans to Sh7 billion in the year started July, offering a boost to workers push for house ownership.

The funds will be offered to banks and savings and credit cooperative society (saccos) this fiscal year, representing a 154.73 percent jump from the Sh2.748 billion a year earlier, the Kenya Mortgage Refinancing Company (KMRC) said.

The mortgage refinance firm, which got permit to formally start operations in September 2020, offers funds to banks and saccos for onward lending to homeowners at an annual interest of five percent.

The recipient lenders are, in turn, expected to lend out the cash at single-digit interest rate — lower than average market rate of 12.06 percent as of May 2021. It offers loans to workers earning less than Sh150,000 and whom banks had locked out from the mortgage market.

“KMRC is accelerating processing of loans so that participating financial institutions may continue to originate mortgages and, therefore, catalyse applications for home loans,” said chief executive Johnson Oltetia in a statement.

“KMRC …[will be] introducing developers to the participating financial institutions so as to create visibility of available eligible properties and encourage uptake of loans for home purchasing.”

Prospective home buyers, who qualify for home loans under the KMRC framework, access up to Sh4 million for property in Nairobi metropolitan area and Sh3 million elsewhere, with a repayment period of up to 20 years.

KCB Group — the largest mortgage financier by market size — received more than three quarters of the Sh2.748 billion issued in the year ended June 2021, which covered about 1,400 mortgages that met conditions on size, interest and tenure under the KMRC disbursement criteria. Other beneficiaries were HF Group (Sh515 million), Stima Sacco (Sh69million) and Tower Sacco (Sh30 million).

The average size for the 1,400 home loans refinanced by KMRC last fiscal year is Sh2.6 million — more than three times smaller than banking industry’s average mortgage size of Sh8.6 million last year.

“We are not too worried about supply [because] we have been having a lot of feedback from developers,” said Mr Oltetia in an earlier interview.

“The reason is that they [developers] want to start showing their developments to the banks so that the banks can start interesting their customers with those developments. And that’s part of the stimulation of supply.”

KMRC has raised nearly Sh40 billion including Sh2.2 billion in equity capital, Sh25 billion committed by the World Bank and Sh10 billion from African Development Bank.

Mortgage firms have shied away from writing housing loans mainly due to a lack of long-term deposits in the industry to match them.

KMRC will now feed the banks with long-term funding, reducing the lenders reliance on short term loans.