Workers seeking to build homes in the villages can now tap into a Sh10 billion loan kitty under the controversial Housing Levy offering low-cost housing mortgages for rural areas.
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 will be repaid at single digit interest, will be repaid in 10 years as the State races to plug a market ignored by commercial banks.
The government has made the rural housing loan programme part of the affordable housing scheme, enabling workers facing hurdles accessing cheap loans to get financing to build dream homes in villages.
Those advocating for building huge mansions in remote areas by urban dwellers term such investments as retirement homes and economic catalysts in the countryside.
Critics have termed them dead capital, property which cannot be exchanged for financial capital.
The rural housing mortgages means that the 1.5 percent housing levy paid by employees will also benefit those outside of the affordable housing projects.
The levy, which is paid by workers and matched by employers, is managed by the National Housing Development Fund (NHDF).
“The interest rate or administration fee for a loan issued under this Act, where applicable, shall be payable on a reducing balance at such rate as may be prescribed by the Cabinet Secretary,” reads part of the Act.
Asked about the interest rate, the Lands Cabinet Secretary Alice Wahome directed this paper to the State Department for Housing and Urban Development where efforts to get the charges were not successful.
The decision to incentivize Kenyans to build homes in rural areas by taking cheap loans is a major boost to the economies of the countryside where most Kenyans reside.
Banks have shied from offering mortgages to workers seeking to build homes in rural Kenya on low valuation of the properties.
Kenya, like many other developing countries, has experienced huge outflow of Kenyans from the countryside in a rural-to-urban migration that has led to the decline of agriculture while leading to overcrowding in urban areas.
The provision of affordable housing units for millions in urban areas has been difficult due to the high cost of construction, a situation that has led to the proliferation of slums in towns such as Nairobi.
However, the government wants to reverse the tide of the rural-to-urban migration by incentivizing Kenyans with land in their rural areas to take loans and build homes.
Run by the National Housing Corporation, the rural housing loan programme was first launched by the administration of retired President Uhuru Kenyatta in 2021. Since then, only loans of Sh110 million have been given out to build rural homes.
In the financial year ending June 2024, the government had a target of giving out loans amounting to Sh1 billion for the construction of affordable homes in rural areas. However, the report shows that no rural housing loan was disbursed in this period.
The government has sought to boost this loan programme by establishing the County Rural and Urban Affordable Housing Committee which will be expected to develop the framework for the development of affordable housing within the county and to develop the affordable housing investment programme for the county.
Initially, the interest rates for the rural loans were set at 13 percent on a reducing balance.
Under the housing levy, the rural mortgages will be offered at rates lower than those offered by the Kenya Mortgage Refinance Company (KMRC) at 9.5 percent.
KMRC helps banks access cheap long-term finance for onward lending to households.
Data from the Kenya National Bureau of Statistics (KNBS) shows that more than 70 percent of Kenya's population lives in rural areas.
Only 1.5 percent of households in rural Kenya occupy adequate quality housing compared to 14.1 percent by their urban peers, the KNBS report shows.
The creation of the 47 counties has also created 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, Mombasa, Kiambu, Machakos and Kisumu, with the government setting aside Sh500 billion for 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 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.
