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The Kenya Mortgage Refinancing Company (KMRC) launched on Wednesday by President Uhuru Kenyatta is expected to double the number of mortgage accounts by providing incentives to financial institutions, enabling them to offer long-tenured loans to home buyers.
KMRC is set to advance cash to commercial banks, Saccos and mortgage companies on a wholesale basis to enable them give affordable loans to account holders or members to buy or build homes.
Seven commercial banks among them Cooperative Bank, KCB, Barclays, 11 deposit-taking Saccos and the Kenya Women Trust Fund (KWFT) infused into KMRC will take up an 80 percent stake in the entity, sealing a majority control.
“We expect to conduct a share allotment which will see government end up with a 20 percent stake in KMRC while the banks and SACCOs will hold stake in the remain 80 percent portion,” noted the Interim Chief Executive Officer to the KMRC Johnstone Olteita.
The entities have so far contributed to a Ksh.1.2 billion stake to the company bringing the total working capital to Ksh.2.2 billion to add to Treasury’s own share input.
Cheap mortgages
The set of lenders is expected to draw on KMRC’s wealth of funds to advance mortgages to consumers at concessional rates.
The refinancing company will venture into the capital markets to issue mortgage-backed bonds for onward lending to the primary mortgage financiers in addition to funds raised through sovereign debt from development partners such as the African Development Bank (AfDB) and the World Bank.
AfDB and World Bank have already availed Ksh.10.2 and Ksh.25 billion respectively setting the stage for the issuance of subsidized mortgage loans in the market.
“The low mortgage penetration is because of liability mismatch, where there are more short-term deposits in Kenya making long-term lending by commercial banks and SACCOs unattractive. Therefore KMRC will help to correct this problem and increase the number of mortgages in the middle to long-term,” Treasury Cabinet Secretary Henry Rotich said.
Affordable Housing
The on-boarding of the KMRC serves to complement the government’s cheap housing initiative which is pegged on the construction of 500,000 affordable homes over the next three years.
While the implementation of the National Housing Development Fund (NHDF) which prescribes a 1.5 percent levy on salaried employees has hit a legal snag, the completion of the framework to the mortgage refinancing arm serves as a step in the path to affordable homes for all.
The banking sector has expressed confidence in KMRC’s role of easing the mortgage’s market liquidity, backing the facility to offer reprieve to potential home owners who would have otherwise remained outside the bounds of property ownership.
“While you can have the same amount on money on a short term basis, repayments from the mortgagees are so high and may not fit within their cash flows. When you extend the same funding over a longer period, the installments become affordable,” noted Kenya Bankers Association (KBA) C.E.O. Habil Olaka.
According to data from the Central Bank of Kenya (CBK), total outstanding debt in 2017 stood at a mere 2.74 percent of Gross Domestic Product (GDP) represented in 26,000 mortgage accounts valued at Ksh.223 billion, to reflect on the constrained homes market under current market conditions.
KMRC is expected to offset the depressive state of the mortgage market to avail residential mortgage loans under the affordable housing plan and through the general market.
Affordable housing loans are expected to be capped at Ksh.4 million and Ksh.3 million for the Nairobi Metro area and other parts of the country respectively.
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