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Flashy houses ruled out under low-cost village home loans
The government has made the Rural Housing Loan Scheme part of the Affordable Housing Scheme, enabling workers to finance the construction of dream homes in villages.
The government will lock out workers seeking to build flashy homes in the village using Sh10 billion low-cost mortgages under the controversial Housing Levy.
Said Athman, the Housing Secretary at the Ministry of Housing, said the government is developing legislation for the Affordable Housing Act 2024.
The rules will bar individuals who want to use the state loans to build glitzy mansions in their rural homes.
Treasury disclosures indicate that single-family applicants will be eligible for a maximum loan of Sh5 million and up to Sh10 million for multiple-family dwellings.
The loan, which comes with single-digit interest, will be repaid in 10 years as the State races to plug a market ignored by commercial banks.
“We don’t want people to take loans to build 10-bedroom houses because remember it is supposed to be for affordable houses,” said Mr Athman.
The regulations will also spell out conditions for the rural mortgages and their interest.
The government has made the rural housing loan programme part of the affordable housing scheme, enabling workers facing hurdles in accessing cheap loans to get financing to build dream homes in villages.
This means that the 1.5 percent housing levy paid by employees will also benefit those outside the designated affordable housing projects.
“But in the rural areas, people own the compound. So you need a different product for those living in rural areas, one of which is a loan to improve their living conditions,” said Mr Athman.
Banks have generally shied from offering mortgages to workers seeking to build homes in rural Kenya on low of the properties and lack of documentation.
The government insists that the ongoing loan program being run by the National Housing Corporation (NHC), one of the key institutions helping to build affordable houses, will continue to run separately.
Under the scheme, the NHC advances loans of up to Sh3 million to rural area residents at a rate of 13 percent on a reducing balance of payment. The loans have a maximum repayment period of 10 years.
By the end of June 2024, the NHC had given rural home loans worth Sh1 billion, official data shows.
Census data shows that only 1.5 percent of households in rural Kenya occupy adequate quality housing compared to 14.1 percent of their urban peers.
More than 70 percent of Kenyans live in rural areas, though there has been a steady migration of people to urban areas in search of job opportunities.
The creation of the 47 counties has also created a major demand for decent houses in rural areas, as people who had initially lived and worked in major towns move to counties.
Most of the affordable housing projects are in major towns like Nairobi, Kisumu, Kiambu, Mombasa and Machakos, with the government setting aside Sh500 billion for the construction of houses for the middle class and the poor in urban areas.
In its first financial year, the government collected Sh64 billion from the housing levy, with the money expected to be used for affordable houses including giving loans for the construction of rural homes.
However, the Board of National Housing Development Fund (NHDF) had spent less than a fifth of the money collected from the levy, or Sh15.39 billion, leaving it with the uphill task of raising and spending another Sh484.61 billion by the end of 2032.
