Kenya plans to raise as much as 55 billion shillings ($545 million) this fiscal year for an affordable-housing fund through a new tax, helping the state to finance 500,000 new low-income units promised by President Uhuru Kenyatta.
The average cost for each unit will be 2.3 million shillings, Principal Secretary for Housing and Urban Development Charles Hinga said Monday at a forum in the capital, Nairobi.
The government introduced a 1.5 percent tax for both workers and employers in the fiscal year that began in July to fund the housing, which Kenyatta says will be built before his second and final term ends in 2022.
“We will be able to provide long-term mortgage and tenant-service schemes, and provide credit with interest rates of 3-5 percent to achieve an affordable housing vision” in which no one spends more than 30 percent of their disposable income on housing, Hinga said.
While 72 percent of all formally employed Kenyans earn between 15,000 shillings and 49,999 shillings a month, only 2 percent of the 50,000 houses built in the country each year are targeted at those on lower incomes, Hinga said.
Kenya had only 26,187 mortgages by the end of 2017, worth an average of 10.9 million shillings, according to central bank data. Home-loan assets stood at 223.2 billion shillings last year, with six lenders providing three quarters of the financing.
Kenya has a shortfall of 2 million units and needs to construct 300,000 houses annually to plug the deficit, according to Carlos Felipe Jaramillo, the country director for the World Bank.
Historically, high land prices were the biggest cause of inflated housing costs, leaving only 18 percent of the population owning homes in urban areas, according to the Kenya Bankers Association.
“Nairobi has the most expensive land in Africa,” Hinga said. “And this is because we don’t have enough serviced land and also there is a lot of land that is going from one hand to another for speculative purposes.”
Source: Adelaide Changole, Bloomberg