Stage Set for Launch of State Mortgage Company

The State Department of Housing has asked Parliament to allocate Sh6 billion for, among others, the delivery of 500,000 low-cost homes as well as the formation of the Kenya Mortgage Refinance Company, a State-backed firm that will issue bonds in capital markets.

The department told legislators that Sh4 billion will be used for upgrading slums, while the balance will kick-start a project that seeks to deliver half a million low-cost homes by 2023.

“We need Sh2 billion for delivery of the housing units. This money will also be used to restructure the National Housing Corporation and establish the Kenya Mortgage Refinance Company and set up the National Housing Development Fund,” Aidah Munano, the PS told the Transport Committee that was studying the Budget Policy Statement last month.

Already, a task force on affordable housing finance has been set up with a mandate to establish Kenya Mortgage Refinance Company that will be mandated to issue bonds whose proceeds will be extended as long-term loans to banks as security against the mortgage, says Treasury CS Henry Rotich.

“It [Kenya Mortgage Refinance Company] is expected to operate as a private sector driven company with a public purpose of developing primary and secondary mortgage markets by raising long-term funds from capital markets, thus providing access to affordable housing finance,” Mr Rotich said in the Draft Budget Policy Statement for 2018 last month.

Housing PS Patrick Bucha told MPs that the department was undertaking the development of low-cost houses on a pilot basis in Mavoko, Parklands, Shauri Moyo and Makongeni.

“We are discussing with various county executive committee members to identify land for this project which will be developed through the Public Private Partnership (PPP) with the government providing infrastructure and incentives to investors to build housing units for sale to Kenyans,” Mr Bucha said.

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The World Bank, he said, has already signed an agreement with the Kenyan government to provide credit to banks to finance acquisition of the low-cost homes.

“The government will give both financial and non-financial support to the private sector. The World Bank will give mortgages at 0.75 per cent while the Kenya Mortgage Refinance Company will give bank guarantee to offer affordable mortgages to Kenyans,” he said.

These incentives will, however, yield little if the government fails to address bureaucracy in the State departments.

Barclays Bank of Kenya managing director Jeremy Awori has, for example, singled out red tape in registration of property and approval of construction permits as a disincentive to investors in housing as it builds up inefficiencies.

“If we can make it easier for you to register a charge and do a transfer of property so that instead of taking weeks or months, it happens within a week, I think we would be in a much better system.” Mr Awori said in an interview.

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