THE government's new mortgage scheme for civil servants will be a major boost to the country's property market this year, injecting billions into real estate sector.
This is according to Cytonn Investments' Business and Market Outlook 2016 report released last week.The investment management firm said the government's mortgage scheme for its workers will stimulate the sector which is expected to grow by at least 10 per cent this year.
The expanding middle class, the report says, is expected to maximise on the benefits of these mortgages.
Under the scheme civil servants in job groups G, H, J and equivalent grades in public service will get up to Sh6 million for mortgage while those in grades A, B, C, D, E, F and equivalent grades in public service will get a maximum of Sh4 million as mortgage. Public officers in job groups S, T, U and equivalent grades will access up to Sh20 million home loans.
Lands Cabinet Secretary Jacob Kaimenyi last December published new regulations placing the maximum interest rate on home loans at five per cent and extended the repayment period by two years
According to the Civil Servants (Housing Scheme Fund) (Amendment) Regulations 2015, the interest rate payable on a loan under these regulations shall be a minimum of three per cent and a maximum of five per cent per annum, on a monthly reducing balance inclusive of administration costs.
“A mortgage repayment of three per cent is something many people will afford. The low interest rates are expected to attract a lot of people to invest in houses,” Cytonn’s investment manager Maurice Oduor told the Star.
Cytonn projects that majority of the investments, about 70 per cent, will be between Sh5 million and Sh7 million, with majority of civil servants going for residential homes outside major cities of Nairobi, Mombasa and Kisumu.
“ Many people are now seeking the out of town comfort,” Oduor noted.
Cytonn’s real estate services manager Johnston Denge said: “Given that civil servants are spread across the country, we more of them will now have access to funds for houses. We will see a significant growth despite the harsh interest rate environment in the country,” .
The focus is expected to be on low-income housing as developers explore satellite towns around major cities.
“This is going to be a game changer as it will alter trends where previously only the upper class could afford such services,” Denge said.
Data by the Kenya National Bureau of Statistics shows the real estate sector’s year-on-year growth during the third quarter of 2015 was 5.4 per cent, with the overall sectoral contribution to Gross Domestic Product remaining flat at eight per cent.