"It has been a three-year long and scary journey. It only started as an idea but today, I am happy to be a home owner."
These were the words of Elizabeth Kariuki as she was handed a key to her three-bedroom apartment at Clay City.
Elizabeth recalls that she was only introduced to the idea by a friend and after listening to diverse views, she decided to try.
“Owning a home is an automatic and beautiful thing, and any woman would go to any extent to give their children the gift of a home. Women by nature look for homes for their children because we always think of where our children will live,” she said.
Elizabeth says such a dream cannot be realised without the right people and partners.
For her, she was lucky that when she liked the idea, the Housing Finance was there and proved to be a steady, strong and reliable partner.
Such a dream requires true discipline and keep the picture live. You must sacrifice and get out of the comfort zone; otherwise, it will remain just but a dream
Elizabeth is now one of the home owners at the newly complete 80 units at Clay City off Thika Road.
She was among five home owners who were handed keys to occupy the houses.
The units financed by Housing Finance costs Sh8.65 million down from Sh9 million.
The government is this month expected to roll out allocation of some 1,509 affordable houses to home owners.
State Department of Housing and Urban Panning PS Charles Hinga told the Star the allocation will begin once the policy and criteria for allocation is published.
Hinga said the criteria will give a clear picture of the basis for allocation.
The first batch of flagship houses completed under President Uhuru Kenyatta's affordable housing programme (AHP) was handed over to the government in January.
Those who have contributed the minimum 12.5 per cent (Sh187,500) qualify for the allocation.
Hinga said, for instance, the allocation for the Park Road project will consider civil servants and non-civil servants on 60-to-40 per cent criteria.
"Once a member has been allocated a unit, they will be removed from the AHP Purchase Allocation Waiting List," he said.
FEW OWN HOUSES
Currently Kenya has a low rate of home ownership, with only 25,000 mortgages out of a population of about 50 million people.
“Home ownership is not a privilege for a few. And when we say affordable houses, it is not synonymous with poor quality,” the PS said.
He said the ministry has embarked on a robust plan to simplify the message on affordable housing.
“This should help us tell Kenyans that whatever you are paying for rent, there is a package for you under the affordable housing,” he said.
The AHP proposes interventions to resolve market problems that have led to a limited supply of affordable homes for citizens in the lower-income brackets, as well as provide solutions for increasing access to affordable financing for the targeted homeowners.
A report released by the Interior ministry on the progress of the Big 4 agenda indicates the Housing department has focused on four aspirations amid efforts to achieve the goal.
This includes the construction of 500,000 affordable homes across 47 counties, a 50 per cent reduction in interest rates for homeowner financing solutions in affordable housing, and a 30 per cent reduction in construction costs.
Other aspirations are creation of 350,000 new jobs in the construction sector, 60 per cent reduction in Low-Income Housing gap and 100 per cent increase in construction-sector contribution to the GDP.
The programme has also focused on readying registered members for various forms of end-user financing, including working on credit profiling with local banks for pre-qualification for mortgages.
PLANNING AND PRICING
President Uhuru Kenyatta, under his Big Four Agenda, promised 500,000 affordable housing units for Kenyans by 2022 as one of the deliverables from his flagship projects.
One of the critical activities in laying down the foundation for the development across the country has been the identification of projects with a sizeable delivery of units.
So far, the government has identified 40 locations across the country where it intends to construct 621,523 houses.
Nairobi’s Eastlands area is among the locations that will host these units, with a total of 186,242 out of the 621,523 houses. So far, 1,509 houses have been completed, awaiting allocation in this month.
This includes 480 houses at the Park Road project, 250 in Kisumu, 152 in Machakos, 164 in Embu and 463 in Mavoko.
In addition to the Park Road Flagship project, the government’s strategic partners are constructing another 6,168 houses, which will make it 7,677 houses if completed.
This includes an additional 890 houses at Park Road Project by Nairobi county, 4,118 houses by Moke Gardens, Machakos County, 720 houses by Kings Serenity, Ongata Rongai, and 440 houses by Joinven Investments, Machakos county. All the 6,168 houses are under construction.
There has been conflicting information about the selling prices of the houses, while the government grapples with the definition of an affordable house.
PS Hinga said the lowest price for the one-bedroom unit 30sq m is set at Sh1.5 million. There might be slight variation for projects not on government land but registered under the AHP programme through the Bomayangu portal.
“Overall, we shall have one bedroom of 30sqm selling at Sh1.5 million, 2 bedroom of 40sqm at Sh2 million, 2 bedroom 60sqm at Sh3 million, 3 bedroom of 60sqm at Sh3.5 million and 3 bedroom 80sqm at Sh4 million,” he said.
This will apply for houses within Nairobi. In Embu, a two-bedroom house will cost Sh3.5 million, while a three-bedroom one will go for Sh4.8 million.
In Machakos, while a two-bedroom will cost Sh3.3 million, a three-bedroom will cost Sh4.3 million compared to Kiambu where one-bedroom will cost Sh2.25 million, two-bedroom Sh4 million and a three-bedroom with master en-suite Sh5.4 million.
Under the same project, a one-bedroom in Kisumu will cost Sh2.25 million, two-bedroom Sh3.75 million, while a three-bedroom with master en-suite Sh5.4 million.
HOW TO QUALIFY
For one to qualify for the house, they must show interest in the project by registering on the bomayangu portal. Secondly, one must also be a civil servant or a national police service officer.
Alternatively, an applicant should deposit the amount directly at the KCB account. The balance will be paid under the Tenant Purchase Terms.
The biggest expense in retirement is rent so we want young people to start owning homes in their prime years so that by the time they retire, they have no worry on where they will stay
The applicant must also demonstrate the ability to repay the mortgage.
Among other charges that will be met by the purchasers are stamp duty and transfer charges, insurance on fire and related perils, mortgage protection insurance cover for the principal loanee, service charge and land rents and county government rates.
However, first-time owners and beneficiaries of the project will be exempted from payment of stamp duty.
Hinga said the government has provided several incentives aimed at making the home ownership less burdensome.
For instance, the government has placed an exemption of VAT on all building materials and reduced the completion tax from 30 per cent to 15 per cent.
“We have removed the charges on development approval and waived all charges by the National Construction Authority. Through this, we are now able to hold the developers to account to ensure all these benefits go to the mwananchi,” he said.
Hinga said first-time home owners will not pay stamp duty, despite having been given a Sh9,000 monthly relief.
“We have reviewed the Retirement Benefit Act to allow Kenyans to access part of their pension money, withdraw and pay the deposit,” he said.
Hinga said the government is also playing a critical role in ensuring the establishment of horizontal infrastructure, such as access roads, sewerage systems, water and electricity at no cost.
Already, the Housing department has received letters of commitment from six local banks to launch mortgage products targets toward the lower-income bracket home buyers.
The banks have availed Sh335 billion for qualified home buyers based on the Partial Credit Guarantee (PCG) programme.
Currently, these banks, Equity Bank Sh150 billion, KCB Sh100 billion, NCBA Sh50 billion, Stanbic Bank Sh20 billion, ABSA Sh10 billion and Housing Finance Sh5 billion are conducting credit profiling of registered members on Boma Yangu to see how many can be pre-qualified for mortgages.
“The issue on funding has to be resolved especially since the Housing Fund regulations will be amended to reflect voluntary contributions,” the report said.
The report said while Sh256 million has been contributed from over 20,000 registered members, far more is required to unlock the massive scale that would be required to transform the affordable housing sector.
PROBLEMS FACED
The PS, however, said the only challenge the programme is facing is the increasing misinformation and lack of clarity on what affordable housing is all about.
He said many Kenyans think it is the government building these houses with their tax money.
Hinga said most of the houses in the country are done by the private sector, though there has been a systematic problem that has resulted in the lowest mortgage.
He said conflicting policies within state departments have also crippled full implementation of the project.
The report indicates the project now faces a critical challenge with funding as the previously reported request for Sh45 billion to capitalise the National Housing Development Fund has not been captured in the Budget Policy statement as had been expected.
This means unlocking the path to 100,000 homes may be further delayed, since funds to secure agreements and provide end-user financing through the Partial Credit Guarantee (PCG) programme are not available.
In addition, the existing budget for the Housing department was reallocated to other programmes.
“The National Treasury has indicated a willingness to provide a letter of support to the AHP Developers and Financiers to see if this will catalyse projects. However, the end-user financing requires the PCG programme to be unlocked,” the report said.
The budget requirement for affordable housing was Sh59 billion, of which the department was allocated only Sh7 billion in the FY 2019-20.
However, during the Supplementary Budget II FY 2019-20, the department was handed a budget cut of Sh4.791 billion initially intended to capitalise the Housing Fund.
Therefore, the remaining budget for Affordable Housing was Sh2.218 billion, of which the Housing department has utilised Sh1.763 billion.
There have also been fears that the Sh240 billion project might be thrown into disarray after President Uhuru Kenyatta in December last year ordered the termination of mandatory contributions to the National Housing Development Fund.
It had been holding onto a High Court ruling in its favour to allow for the mandatory contributions, which would see all formal employees, estimated at 2.5 million, remit 1.5 per cent of their salaries to the scheme with an upper cap of Sh2,500 per month.
As a result, employers would be compelled to match up to their employee contributions to the prescribed limit, ending with a projection of Sh48 billion in annual remittances to the fund. This equals Sh240 billion in five years.