Rich Kenyans to Qualify for Cheap Mortgage Scheme

High net-worth Kenyans will now benefit from the State’s affordable housing scheme following the revision of the proposed housing fund guidelines to include high-income earners.

The newly-published rules governing the fund stipulate that salaried workers earning Sh100,000 and above will be allowed to use their savings to access mortgages with an annual interest rate of 7% to acquire homes under the affordable housing scheme.

“Three percent shall be for the preservation of the value of the fund, and up to four percent for management costs, insurance that includes both life and asset and facility management,” read the guidelines that were approved by Cabinet last November.

The housing fund will be established using proceeds of a new 1.5 per cent levy on salaries and revenues expected from voluntary contributions from non-salaried individuals – set at a minimum of Sh200 per month.

The government expects to raise Sh57 billion a year, from about 2.5 million salaried Kenyans.

Under the revised rules, the lowest paid workers, earning less than Sh14,999 per month, (about 2.62 per cent of Kenya’s formally employed workforce) will qualify for social housing – with homes selling for about Sh500,000, while those earning between Sh15,000 and Sh49,999 per month (72 per cent of workforce) will be offered homes under the tenant purchase scheme.

RELATED: What is the Kenya Housing Fund?

Individuals grossing between Sh50,000 and Sh99,000 will be offered mortgages at seven per cent per annum and expected to repay their loans within 15 years. This group represents 23 per cent of the formal workforce, according to the Kenya National Bureau of Statistics.

Original guidelines excluded top earners from the list of beneficiaries of the housing scheme and instead offered to reimburse their contributions and interest after 15 years.

At seven per cent per year, the affordable housing mortgages are fairly cheaper than commercial ones offered by banks at double-digit interest rates.

The plan will, however, wait a little longer following last month’s High Court’s ruling that suspended the implementation of the new levy on salaries pending talks between the government and key stakeholders among them the Federation of Kenya Employers and the Central Organisation of Trade Unions (Cotu), which filed the case.

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