Salaried Kenyans are expected to begin paying monthly contributions to the newly established National Housing Development Fund if proposals in the Finance Bill 2023 are passed into law.
Effective from 1st July 2023, all employers will deduct 3% of an employee’s basic salary and also match it with a similar amount before remitting the sum to this Housing Fund. This is provided that the amount shall not exceed KSh 5,000 per month.
For those who qualify for affordable housing, the accrued contributions will be used to purchase a home under the affordable housing scheme.
Those who do not qualify upon expiry of the 7 years of making contributions to this scheme or after retirement will have their contributions transferred to a retirement benefits scheme or pension fund registered by the Retirement Benefits Authority(RBA).
These contributions can also be transferred to any other person who qualifies under this scheme, spouse or dependent children or receive their contributions in cash.
The employer shall remit both employee and employer contributions to the National Housing Development Fund before the 9th of the following month after the deduction is made.
The Cabinet Secretaries in charge of Housing and the National Treasury are expected to make regulations prescribing the qualifications for participating in the affordable housing scheme.
The Finance Bill seeks to amend the Employment Act, 2007(No. 11 of 2007) to provide for deductions of payments by employers and employees to the National Housing Development Fund, established under the Housing Act.
This clause also provides for the making of regulations to prescribe the qualifications to participate in the affordable housing scheme, which shall commence the operation of the scheme.
Under the Affordable Housing Scheme, the Government has been partnering with private sector players and other development partners, to construct various housing units across the country. Such arrangements have been the ongoing construction of 1370 units under the Park Road Civil Servants Scheme as well as a similar undertaking in Machakos County with 200 units. Other similar projects are taking place in Kisumu, Embu and Kiambu civil servants’ housing schemes-all at various stages of completion or occupation.
Potential buyers can also do an outright purchase of affordable housing units that the state has constructed, which cost not more than KSh 4 million or individuals with plots can apply for a construction mortgage.
The Government has also set up the Kenya Mortgage Refinance Company(KMRC), where it sources funds from development partners for onward lending to primary mortgage lenders-which include commercial banks, mortgage firms and Savings and Credit Co-operative. Potential home buyers are able to access mortgages at affordable single-digit rates, cash that is provided through KMRC.
KMRC, a Government-owned firm was set up to give mortgage liquidity facilities to banks, microfinance institutions and SACCOs. It was established as a Public Private Partnership(PPP) arrangement between the Government of Kenya, and the World Bank with majority ownership held by the private sector at 75.0%. It is still unclear the stake that taxpayers will now command at the company.
The list of major shareholders of the state-backed mortgage firm is the Government of Kenya (25.3%), Development Finance Institutions (22.9%), Commercial Banks-KCB, Co-op Bank, Stanbic Bank, NCBA, Credit Bank, DTB, Absa Kenya and HFC Limited (44.3%), Microfinance Bank-Kenya Women Microfinance Bank(KWFT) and SACCOs-Stima, Imarisha, Ukulima, Tower, Mwalimu, Unaitas, Harambee, Bingwa, Kenya Police, Safaricom and Imarika Sacco, controlling a 7.5% shareholding at KMRC.
