Kenya Mortgage Refinance Company (KMRC) has started to draw Sh35 billion credit line from the World Bank  (WB) to cushion mortgage lenders from errant borrowers.

In a statement in the Budget Policy Statement (BPS) the National Treasury Cabinet Secretary Ukur Yattani said it had mobilised resources to improve the liquidity of the housing agency which last year gave out Sh2.75 billion to KCB and HFC for onward lending.

“The  National  Treasury  has  mobilised  additional  Sh35  billion  from  partners to support the company’s operations,” Treasury CS Ukur Yattani said in the budget statement Monday.

This as lenders face up to Sh1.4 trillion in defaults on Covid-19 shocks, raising concerns the situation could pull back lending, slowing down the government’s affordable housing push.

Mortgage lenders

“In  the  short  term, KMRC is well positioned to support emergency interventions aimed at stabilising the housing market post Covid-19 pandemic,” KMRC Chief Executive Johnstone Oltetia said.

The housing agency said it will  support  mortgage  lenders  by  providing  secure  long term funds against eligible portfolio of mortgages.

This  will  offer  a  transition  path  back  to  growth  and  profitability  for  lenders.

KMRC communication officials are preparing a comprehensive statement on the matter and will soon brief the public. 

According to Treasury, the funds will help maintain adequate liquidity to keep  housing  finance  and  housing  markets functioning  even  in  the  wake  of Covid-19 Pandemic, which has affected the business environment. 

KMRC said 80 per cent  of  World  Bank  credit  line  is  earmarked  for  affordable  housing  which  is  a  loan  of  up  to  Sh4 million  in  Nairobi  metropolitan  area  which includes Kiambu,  Machakos  and  Kajiado,  and  up  to  Sh3  million  elsewhere.  

The  difference,  20 per cent  will  be  available  for  upper  middle  income  housing.  On  the  other  hand,  40 per cent  of  AfDB  funds  will  be  used  to  refinance mortgages of up to Sh5 million and 60 per cent will  go  into  refinancing  mortgages  of  up  to  8 million.  

World Bank approved  a  Sh2.5billion ($250m)  International  Bank  for  Reconstruction  and  Development (IBRD) credit to support the affordable housing program followed by African Development Bank (AfDB) $100 million approval to support the program.

KMRC will lend to banks at an annual interest of  5 per cent, enabling them to write home loans at less than 10 per cent. 

The initiative is part of the Big Four Agenda project in the Jubiliee administration.

For  purposes  of  affordable  housing,  the  borrower’s  income threshold is Sh150,000 per month