Kenya: Piecing Up Together the Vision for Decent Housing

The inaugural 1,370-unit Parkroad estate in Nairobi built under the affordable housing programme (AHP) was quickly snapped up with buyers immediately paying Sh536 million, signalling a huge appetite for price-friendly housing.

When it was mooted, the affordable housing plan was seen by many Kenyans as a pipe dream, as a number of such previous projects have not fared quite well.

However, as many as 312,650 Kenyans have expressed their wish of owning a unit in the government-fronted AHP programme that is now being implemented across major urban centres in the country.

The affordable housing project, which began three years ago, seeks to enhance utilisation of public land in major urban areas where storeyed housing units will be built and sold to Kenyans at a subsidised price.

“All prospective buyers must register via the Bomayangu portal and will be at liberty to make advance payments ahead of being given an opportunity to buy a housing unit in any part of the country that they choose,” Housing and Urban Development principal secretary Charles Hinga told Smart Business.

The AHP journey that received fresh impetus during President Uhuru Kenyatta’s second term started off in Kibera slum, Nairobi under the Kenya Slum Upgrading Programme (KENSUP) when then President Daniel Moi flagged off construction of highrise residential units for housing about 1,000 slum families.


But the programme fizzled out amid claims of corruption where non-Kibera residents benefitted while some beneficiaries were unable to afford the units and were compelled to sell them.

Enter President Kenyatta for his second term and he identified AHP as one of the four pillars that his government would concentrate on to improve housing for the common man.

The programme that kicked off with the 1,370-unit Parkroad project ushered in a new way of implementing public projects where private developers are allocated public land to build houses at their own cost with Kenyans being facilitated via affordable mortgages.

And two weeks ago, Kenya Mortgage Refinance Company disbursed the first Sh2.7 billion to HF Group, KCB Group, Towers Sacco and Stima Sacco for onward lending to their members for purchase of AHP units.

KCB Group received Sh2.13 billion and Housing Finance HFC (Sh514 million) while Stima Sacco and Nyandarua Towers Sacco was offered Sh69 million and Sh29 million respectively.

Beneficiaries will access Sh4 million for houses being bought within Nairobi metropolitan area, which extends to neighbouring Kiambu, Machakos and Kajiado while other county houses will see mortgagees receive a Sh3 million loan.

KMRC chief executive Johnstone Oltetia said all loans will attract a single digit interest rate where KMRC will approve all products prior to their deployment in the market.

“Owner-occupier facilities are a much preferred vehicle since mortgagees will move in with their rent money being used in repaying the loans. That will reduce instances where house buyers default on loan repayments,” he said.

To accommodate affluent borrowers, KMRC said it is eyeing the Nairobi bond market for raising funds that will in turn be lent to local lenders for onward borrowing at commercial rates.

With 26,000 mortgages currently averaging Sh8.5 million being repaid at a minimum of 10 years in the country, KMRC’s entry will enable saccos and local lenders to possess a stronger financial muscle that enhances their ability to lend out mortgages repayable for up to 20 years.

KMRC’s entry remains the main game changer as the cheapest mortgage in town is pegged at 14.1 percent. This is particularly crucial considering that Kenya currently services a paltry 26,000 mortgages.

According to the latest Central Bank of Kenya Kenya’s Bank Supervision Report, the mortgage market grew by 5.7 percent in 2019 or by Sh12.8 billion to stand at Sh237.7 billion compared to a year earlier at Sh224.9 billion.

Microfinance institution

KMRC’s ‘loan’ to the eight lenders and 11 saccos as well as one microfinance institution will attract an annual interest of five percent repayable in 84 months enabling single digit rates of as low as seven percent, lower than the average market rate of 11.95 percent.

Harambee Sacco which has also applied for mortgage re-finance funds from KMRC has since received approval to launch mortgage products set at seven percent interest that includes ready-to-buy units (Home Loan) as well as borrow-to-build (Jenga Loan) products.

The two loans are pegged at eight percent interest rate for the 10-year mortgages and at nine percent for over 10 years and up to 25 year mortgages.

Harambee Sacco chairman Macloud Malonza said they will use their rich land bank to promote their products where each beneficiary will be expected to pay a 10 percent deposit for a mortgage starting at Sh500,000 to a maximum of Sh4 million.

Stima Sacco chief executive Gamaliel Hassan noted that KMRC’s entry opens new opportunities for partnerships between lenders and housing developers thereby fast-tracking completion of units as well as building a pipeline of ready buyers.

“We have housing subsidiaries that our members will use to identify properties they wish to buy. We know each member’s financial ability and that will guide the advice we give to each member,” he said.

This gives private sector players in real estate a leeway to plug in their products with the new regime that will also benefit from a recent government directive allowing pensioners to tap up to 40 percent of their pension savings for buying a house.

The AHP programme has since received unanimous support from county governments that availed 7,000 acres for the planned rollout of the project within their respective major urban centres.

Nairobi County has provided idle state land held by various ministries as well as civil servants’ quarters where colonial standalone bungalows are located.

Nairobi County Government has also sanctioned demolition of old council houses currently accommodating 17,000 families to pave way for high-rise residential developments that will accommodate 167,640 families upon completion of the government-fronted redevelopment.

The move, to be replicated in Kiambu, Thika, Machakos and Kajiado is meant to reduce cost of construction by up to 30 percent. High costs are a major impediment to low and middle income earners acquiring housing units within major urban centres.

36,840 housing units

A total of 36,840 housing units will be constructed in Nairobi under the ongoing first phase under a public-private partnership where local institutional investors, individuals as well as foreign investors have been invited to fund construction of the houses.