A new report by South Africa-based Centre for Affordable Housing Finance in Africa – 2011 Yearbook. Housing Finance in Africa Housing Finance, – shows that in the recent past players in the Kenyan mortgage industry have devised innovative products for the country’s Sh61.4 billion mortgage finance sector.
According to the report, mortgage industry in Kenya has seen the introduction of products such as fixed rate mortgages that are available for 10-20 years, 100 per cent financing for the full value of a house and mortgage insurance against the risk of loss of income by a lender, among other innovative products.
The report further said that the Retirement Benefits Authority’s 2009 move to allow pension contributors to use up to 60 per cent of their contributions to secure mortgages is a great innovation that can leverage assets worth Sh290 billion and increase access for lower-earning individuals who have accumulated substantial pensions.
“Unfortunately, mortgage finance is still accessible to only a small majority of the Kenyan population,” the report stated, quoting the 2010 World Bank research that found that only 11 per cent of Kenyans can afford an average mortgage loan (Sh6.6 million).
A mortgage loan of Sh6.6 million – just enough to buy an entry-level house – demands a monthly repayment of about Sh90,000 for 20 years.
The report cites the growth of housing micro finance as another major innovation of the Kenya mortgage market. Housing micro finance is a lending model used by NGOs and saccos to provide mortgage finance for the low income earners.
To address the current housing shortage, the report recommends that the annual construction of new housing should be five times the number of housing units currently being supplied.
The study says that Kenya’s residential property price inflation over the past eight years has been occasioned by both the high demand for housing and a highly speculative property market.