The first Sacco in the country to be licensed to offer mortgage facilities from the Kenya Mortgage Refinance Company (KMRC), Harambee Sacco projects that by 2025, the Sacco will have financed up to 600 units at a cost of Sh2.4 billion.
KMRC lisence allowed Harambee Sacco to unveil two mortgage products; the Harambee Home Loan and the Harambee Jenga Loan.
Harambee Home loan enables its members to purchase readily built houses while for Harambee Jenga loan, the borrowers are facilitated to build a house on their own parcels of land under the sacco’s supervision.
The two loans are pegged at eight percent interest rate for the 10-year mortgages and at nine percent for over 10 years and up to 25 year mortgages.
Harambee Sacco chairman Macloud Malonza said they will cash in on their rich land bank to promote their two products where each beneficiary will be expected to pay a 10 percent deposit for a mortgage starting at Sh500,000 to a maximum of Sh4 million.
Furthermore, each mortgage is pegged at member’s age until retirement at 60 years or 25 years’ repayment period where Jenga loans will be based on a draw-down basis based on stage by stage arrangement during construction
This means individuals who qualify for the subsidised loans or those earning less than Sh150,000, will have to top up their loans with commercial credit should they seek a home above the Sh4 million.
KMRC chief executive Johnson Oltetia said Harambee Sacco which contributed Sh25 million for a stake in KMRC, together with 10 others were legible for the mortgage re-finance facility owing to their shareholding.
“We have a ready Sh4.5 billion mortgage portfolio that our shareholders can tap into for onward lending to Kenyans and a further Sh25 billion loan facility from the World Bank that we can readily access. Africa Development Bank has committed Sh10 billion,” he said.
KMRC will lend to banks and financial co-operatives at an annual interest of five percent, enabling them to write home loans at between seven to nine percent-lower than average market rate of 11.94 percent or 42 percent cheaper.
Mr Oltetia said buyers seeking loans for houses valued above Sh4 million, will negotiate for top-up loans with participating lenders. The additional funding will be at market rates.
The government owns a 25 percent stake in KMRC, with the rest of the shares held by banks, saccos and microfinance institutions.
Shelter Afrique and the International Finance Corporation (IFC), the World Bank’s private financing arm, became the newest shareholders of KMRC.
The KMRC funding is expected to ease home ownership. Mortgage firms have long shied away from writing housing loans, mainly due to a lack of long-term deposits.
The KMRC funding is expected to drive the number of mortgage accounts to an estimated 60,000 by 2022.
Commercial banks had only 26,504 mortgage accounts in their books worth Sh224.8 billion as at the end of 2018, according to CBK data.
Banks have gone slow on providing home loans due to a spike in defaults which hit Sh38 billion in 2018.
KMRC was established by the National Treasury to support affordable housing development in Kenya.
It was incorporated in April 2018 under the Companies Act for purposes of providing long-term financing in order to increase availability of affordable home loans.
Its mandate is in line with President Uhuru’s Agenda Four, which seeks to ensure Kenyans have access to affordable housing, universal healthcare, improve manufacturing and food security.
KMRC will also advance cash to commercial banks and mortgage companies as well for onward lending to individual home buyers.
The government plans to build at least 500,000 low-cost houses in a partnership with the private sector. Aside from offering low-income Kenyans with access to housing, the scheme will help to create over 300,000 jobs, while providing a good market for local manufacturers and suppliers.
Housing and Urban PS Charles Hinga said that the government established KMRC to support primary mortgage providers.
“This is a timely and noble idea taking into consideration that affordable mortgage finance has remained a pipe dream for long and continues to be one of the biggest impediments to delivery of affordable housing,” said the PS.
He said the ministry is putting all efforts and measures to realize the affordable housing programme which is one of the government’s Big Four Agenda.
Harambee Sacco has over 80,000 members in 174 branches across the country. It draws its membership mainly from, Kenya Defence Forces, National Police Service, National Youth Service, national and county governments, government parastatals and departments and constitutional bodies.