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Mortgages in Kenya

In this episode recorded on 19.09.2024, we are joined by Geofrey Mwaura (https://x.com/Geofreymn) - Head of Refinancing at Kenya Mortgage Refinance Company (https://x.com/kmrc_co) , Lydia Owuor (https://x.com/Lydia_AOwuor) - Partner at Cliffe Dekker Hofmeyr (https://x.com/CDHLegal) , Stella Situma (https://x.com/StellaSitumaN) - Partner at Cliffe Dekker Hofmeyr (https://x.com/CDHLegal) , and Beatrice Chege (https://x.com/beatricechege) - Head of Mortage at Absa Bank Kenya (https://x.com/AbsaKenya) to discuss common misconceptions about mortgages in Kenya. Subscribe to get notified when we make a new post. Key Quotes “A mortgage can typically be obtained through three means, a borrower may be buying an existing house, or you may be buying off plan, or you may be in ownership of an undeveloped piece of land, and then you're borrowing to construct.” Lydia Owuor “When you look at the statistics, Kenya's mortgage penetration is less than 2%, in fact, 1.9% as per the last CBK report that was published last month. We’re actually talking about a very big gap in terms of mortgage penetration. Homeownership sits at around 21% in the country compared to other markets where they are up over 70-65% in Eastern Europe where home ownership is quite high. So we have a lot to do.” Geoffrey Mwaura “When we started, there was a limitation on income, 150, 000 which moved to 200, 000. But recently, we have removed that income limitation so that we allow more Kenyans to enjoy this program. So as of today, you can access up to 10.5 million with no income restrictions. So if you are earning through employment or you are doing business, you can still access this as long as you are buying a property that is within that 10.5 million for your own occupation.” GeoffreyMwaura “What I want to emphasize is that due diligence is key. In circumstances where you're buying, due diligence is key. Due diligence on the registered owner of the property, due diligence on the property itself, and lately the scope of due diligence has expanded. We've seen flooding incidents, and that may require structural due diligence before you acquire such properties. We've seen properties that have been adversely mentioned. We have an ongoing land conversion and migration process, which is a process of tidying up our records. And there are some properties within Nairobi because that's where we still are, which have not been gazetted for conversion. So you need to be proactive, check why your property has not been gazetted for conversion and please deal with those issues. So do not skip due diligence.” Lydia Owuor One of the things to look at when you're dealing with such developers is do they have the necessary approvals for the development that they're taking out? And this is where you actually demand to see those documents because you're buying into this and you need to know that you're buying into something that has already been legally recognized by the government. And then also do they have enough money to finish the construction? Where is their source of income? You don't want to be the ones pumping everything and you know with pre-sales the deposits don't come all at the same time. So when people are not paying what happens does the developer stall and just wait for you to pump in the money?” Beatrice Chege Show Notes 00:00:00 Introduction 00:02:49 Understanding Mortgages in Kenya 00:04:18 KMRC’s Role in Affordable Housing  00:06:29 Eligibility Criteria and Legal Aspects for Mortgages  00:18:54 Debunking Mortgage Myths 00:23:57 KMRC’s Funding and Impact  00:30:57 Down Payment, Monthly Repayments, and Foreclosure 00:45:08 Income Limits and Mortgage Accessibility 00:48:52 Credit Worthiness and Mortgage Approval Process 00:54:28 Due Diligence, Success Stories, and Market Impact 01:02:02 Mortgage Products and Closing Remarks Get full access to The Mwango Weekly at mwangocapital.substack.com/subscribe (https://mwangocapital.substack.com/su...)