Kenya’s mortgage sector has been quite insignificant as a facilitator of home ownership in the country. However, this is about to change significantly as Kenya’s largest mortgage lender, KCB, plans to double its mortgage lending portfolio over the next two years.
According to Bloomberg, KCB Group which is Kenya’s biggest bank by assets, currently has KSh. 70 billion in home loans with plans to accumulate 20,000 mortgages of its books by the end of 2020.
In a recent interview the banks CEO, Joshua Oigara, mentioned that part of the strategy is to offer longer repayment periods.
He also said that the credit facilities will be targeting individuals looking for long-term loans of 15-20 years. Apparently, the group is looking to tap into the governments universal affordable housing agenda as well.
The government has been working to complete the establishment of the Kenya Mortgage Refinancing Company by the end of this month, which is supposed to provide funding to lenders and enable banks to refinance current home loans.
The agency will see government providing 1.5 billion shillings of the funds in exchange for 20 percent stake, while commercial banks, credit unions, development agencies and other investors contribute the rest of the funding.
Kenya’s real estate market has recently been affected by a dip in home sales which resulted in a rise in related loan defaults. According to the most recent Central Bank of Kenya’s (CBK’s) quarterly report, 11.3 percent of the KSh. 392.7 billion gross loans extended to investors in land and houses by commercial banks over the years were not being serviced as at the end of June.
Meanwhile non-performing loans (NPLs) in the sector rose by 15.8 percent in April-June to Sh44.4 billion compared to the previous quarter as property developers recorded the highest growth in loan defauts compared to other sectors.