NCBA Bank Kenya Plc partnered with Tatu City, a leading urban developer in Kenya, to provide mortgage facilities to home buyers within their mixed-use development.
The partnership marks the second banking institution to partner with the Kiambu based mixed-use property developer after they signed an agreement with ABSA Bank Kenya in June 2020, to provide mortgage loans for home financing including insurance products.
The partnership between NCBA and Tatu City will provide homeowners with a variety of options including the purchase of plots, construction financing and loans to buy and build.
The mortgage financing, which will be available for both salaried and non-salaried individuals, is expected to be at an interest rate of 13.0 percent with a minimum deposit rate of 10.0 percent of the property value.
Buyers purchasing land within the Tatu City project will receive up to 70.0percent financing with a repayment period of up to 5 years while those taking the buy and build option will receive up to 80.0 percent financing with a maximum repayment period of 25 years depending on their employment status.
Homeownership has remained low in Kenya at approximately 21.3percent implying that more than 78.7 percent of the total population are renters, compared to more developed countries such as South Africa which have more than 53.0percent of the population owning homes.
The low homeownership level in Kenya is attributed to the unavailability and unaffordability of housing finance. The graph below shows the homeownership percentages for different countries in comparison to Kenya.
The subject partnership is a step in the right direction towards promoting increased access to mortgages but it is yet to address the key issues affecting mortgage affordability.
As of 2018, mortgage accounts in Kenya stood at 26,504 accounts out of an adult population of more than 24 million, the low uptake is attributed to;
i) high-interest rates and high deposit requirements
ii) soaring of property prices
iii) low-income levels making it hard to service loans
v) lack of credit risk information for those in the informal sector leading to their exclusion.
“In our view, the continued focus on increasing access to mortgages by private partners also complements government efforts geared towards enhancing affordable homeownership supported by the availability of mortgage facilities particularly through the Kenya Mortgage Refinancing Company (KMRC),” said Cytonn.