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Making Homeownership Affordable: KMRC’s Solution for Low-Income Earners

Unlocking affordable houses has been President Ruto’s ambitious plan that aims to address the housing needs of low-income earners.

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Ruto’s plan has sparked significant attention recently. The main target is to construct approximately 250,000 affordable housing units annually, his administration aims to reduce the housing crisis faced by many Kenyans.

Making Homeownership Affordable: KMRC's Solution for Low-Income Earners.
Making Homeownership Affordable: KMRC’s Solution for Low-Income Earners. PHOTO/Courtesy.

Unfortunately, the average mortgage size in 2022 stood at Ksh9 million, with an average interest rate of 12.3 percent and a repayment period of 11 years. This reality affects low- to mid-income workers from accessing the limited home loans market in the country.

The Kenya Mortgage Refinance Company (KMRC) established in 2020 is a collaborative initiative between the Treasury and private lenders. KMRC’s mission is to eliminate risking the mortgage market by enabling access to home loans for individuals earning Ksh150,000 and below.

The company raises long-term funds and makes them available to participating banks, savings and credit cooperatives (Saccos), and microfinance institutions. These institutions (primary lenders), receive funds at a favorable interest rate of five percent and are expected to lend to customers at single-digit interest rates, offering repayment periods of up to 25 years.

Therefore, those who qualify for a state-backed home loan through KMRC are any citizens, especially those with low monthly income. Individuals earning less than Ksh150, 000 fall into the low-income category and are eligible to apply for the subsidized loan and first-time homebuyers are given a priority.

The process of applying for a home loan under the KMRC framework begins with prospective homebuyers identifying a house they can afford based on their monthly income. Thereafter, they can approach any bank or Sacco that participate in the KMRC plan for a home loan to finance the purchase.

Making Homeownership Affordable: KMRC's Solution for Low-Income Earners.
Making Homeownership Affordable: KMRC’s Solution for Low-Income Earners. PHOTO/Courtesy.

Currently, commercial banks such as KCB, NCBA, Co-operative, Absa, DTB, Stanbic, HF Group, and Credit Bank are among the institutions participating in the KMRC arrangement.

In addition, saccos like Stima, Mwalimu, Harambee, Unaitas, Kenya Police, Bingwa, Imarika, Safaricom, Ukulima, Tower, and Imarisha are part of the program. The Kenya Women Microfinance Bank (KWFT) is the sole microfinancier taking part in the KMRC’s home ownership plan.

Read Also: Kenya Banking Industry Growth Attributed to Mobile Banking

In a case where you already own land and want to construct your own house, KMRC will be able to finance borrowers’ home construction projects. In such cases, the participating financial institution, whether a bank, sacco, or microfinancier, can provide a construction loan that qualifies as a home loan, with the provision of an implementation plan and period.

The company also funds the purchase of land for building through its ‘buy and build’ offering. This means that aspiring homeowners can rely on KMRC for financial support when acquiring land for constructing their dream homes.

For individuals in the informal sector, KMRC is working to facilitate an alternative credit assessment mechanism. This service aims to assist prospective homebuyers with irregular incomes in determining their ability to service a mortgage. By implementing this mechanism, KMRC aims to support loaners in the informal sector to enable them to own homes affordably.

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