Secret to home ownership? It is out in the open

By Mbugua Ng’ang’a

It is important to acknowledge the contribution that President Uhuru Kenyatta’s administration has made in creating an environment that has made owning homes affordable for middle class families, particularly in urban areas. In 10 to 20 years, Kenya is expected to record a significant increase in its urban population as its economy modernises rapidly and more people transition from farming. This is in keeping with global trends informed by advances in the Fourth Industrial Revolution, and as more young people consider urban spaces their homes.
Most urban migrants end up renting houses, meaning that they will have nothing to show – in terms of investments in accommodation – for their money after decades as tenants. However, making homes affordable for such migrant workers will help them grow their investments, consolidate their wealth and bequeath property to their children.
One other significant advantage of owning homes in urban areas is that it will reduce peer and family pressure for migrant workers to build rural homes that they hardly live in except when they travel upcountry. Kenya has no shortage of such dead capital, which would be better utilised under the new home ownership loan regime.
That is why lenders, particularly Saccos, should take an active role in first signing up for partnerships with Kenya Mortgage Refinance Company (KMRC), the government agency that is providing funding to lenders interested in participating in the affordable homes programme.
It is encouraging that leading deposit taking Saccos, such as Stima Sacco, have already signed up, becoming one of only nine Saccos that have done so. Stima, for instance, has two mortgage schemes – one for employed members and another for those in businesses, for which it is charging nine and 9.5 per cent respectively. According to Housing PS Charles Hinga, such low lending rates make the cost of mortgages almost equal to renting.
Considering that there are over 22,000 Saccos in Kenya – with over 14 million members – this means they have potential to play a major role in making the dream of affordable home ownership a reality for a large swathe of their members.
One of the advantages of this programme is that it will help many Kenyans who own idle plots of land in suburbs to unlock value by investing in building homes, either for their own dwelling or for rent. And with the recent increase in uptake of AirBnB services, it is possible for them to go beyond traditional renting and embrace digital accommodation businesses and technologies.
For this to happen, however, Saccos should embark on member education with a view to increasing uptake of affordable home loans. Given how Sacco loans are structured – based on the model of borrowing three times one’s savings – this offers a window of opportunity for members to borrow within their means.
This offers several advantages; first, reducing the risk of default, secondly, the risk of losing the house in the event of disruptions such as job losses or illness and giving families stability. Indeed, research has shown that children who enjoy security of shelter perform better in school than those who don’t.
Over time, and with a critical mass, a significant uptake of such loans from Saccos, could lead banks to lower their own mortgage rates, which currently range from between 14 to 18 percent. By extension, this will increase the number of borrowers taking home ownership loans from banks.
This could also open more avenues for families to expand their wealth base given, for instance, that one can use a home as collateral to buy a second one or to secure financing to start or grow a business.
One interesting trend that has emerged from data collected through the KMRC partnership with Saccos is that there is a significantly large number of women who are borrowing to build, either on their own or in partnership with their spouses. This has important implications for economic empowerment of women who are traditionally left out of inheritance of family property, either as daughters or spouses.
With more women names appearing on title deeds and home ownership documents, this could lead to an increase in long-term family stability. This is an important aspect of the Social Pillar of Kenya’s Vision 2030 development blueprint. It is also a key plank of the Big Four agenda, meaning that making this programme work will be a win for citizens and government.
— The writer is a media professional. This is the last instalment of his column –Mbugua@bigbooks.co.ke

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