Many Kenyans opt to continue renting due to the relatively high cost of taking up a mortgage. In the end, some Kenyans get to retirement without a property to retire to!
By Co-op News
As we settle in life, many and competing financial needs kick in, and we tend to “shelf” the goal of acquiring property later in life.
Many Kenyans opt to continue renting due to the relatively high cost of taking up a mortgage. In the end, some Kenyans get to retirement without a property to retire to!
For this reason, the government is keen to ensure Kenyans can acquire affordable houses, including amending the retirement benefits mortgage loan.
The Retirement Benefits (Mortgage Loans) (Amendment) Regulations, 2020, were published in the Kenya Gazette of 9 October through Legal Notice No. 192 of 2020.
A member of a retirement benefits scheme can now utilize a portion of the accrued retirement benefits to purchasing a residential house from an institution such as a commercial bank, mortgage or financial institution.
Recognized property vendors include Financial Institutions, Insurance Companies, Schemes, Tenant Purchase Schemes, Saccos, National Housing Corporation, and Projects Approved by the Ministry of Housing.
For Kenyans wishing to acquire a property using their retirement benefits, they can now do so
The Retirement Benefits (Mortgage Loans) Amendment, Regulations 2020 provides for the utilization of accrued benefits as follows:
a) An amount not exceeding forty per cent (40%) of the members accrued benefits up to a maximum limit of Ksh 7,000,000 or the purchase price of the residential house.
b) Any additional voluntary contributions made by the member for the purpose of augmentation of retirement benefits may be used to top up the benefits available for the purchase of a residential house.
c) Additional Voluntary contributions made by a member towards post-retirement medical fund SHALL NOT be applied to purchase a residential house by the member.
Restrictions on Purchase
The following shall not be eligible to utilize their accrued benefits to purchase a residential house;
a) A member who is paid a pension by a scheme.
b) A Member who has taken early retirement.
c) A Member who has attained retirement age.
d) A member who has an existing mortgage facility from any other institution will not be allowed to utilize their accrued benefits to offset the balance on that mortgage facility.
Bank financing is capped at 90% of the property price or property value – whichever is lower, and the maximum amount considered from salary is 60% of the current income.
The loan repayment tenure is capped to 20 years – subject to retirement age, and an additional 7% to 9% is required to cater for the associated mortgage costs.
BUYING OR BUILDING A HOUSE?
The debate on whether to build or buy is somewhat divisive depending on whom you engage. According to Mr Simon Wafubwa, Managing Director, Enwealth Financial Services, various concerns will arise, such as the Cost of Purchase vs Construction, Timelines, Personal taste, maintenance.
Why Build
• Custom-make your dream home
• control over the features and materials to be used on the project
• Own schedule for completion
Why Buy
• Ready finished house
• Immediate occupation – No waiting
• No ‘fundi’ hustle
• Choice of various houses, including apartment
Mr Wafubwa, who spoke during the Pension Backed Mortgage Forum Webinar, notes that considering all factors, none of the two options is better (or easier) than the other as both involve some hard work. However, with the correct information and careful planning, the result is satisfactory, whichever option you choose.
The impact of the Covid-19 Pandemic on affordable housing development
- Lower Rents and Prices or flat growth
- Reduced Occupancy Rates – Office buildings
- Reduced foreign investments – Firms globally have put on hold expansion
- Disruption of the retail segment
- A broader range of risks will emerge accelerating behavioral change
- Technology innovation and sustainability will be key drivers for value
- Collaborating with governments will become more important
- Office space demand is also likely to diminish teams Zoom take over
