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Cheaper homes on the way in Kenya

NAIROBI, Kenya Jun 14 – Cheaper home loans are in the offing following measures taken by Finance Minister Uhuru Kenyatta in the 2010/2011 budget.

Housing Finance Managing Director Frank Ireri has welcomed the measures arguing it would make it easier for more Kenyans to own homes. He particularly praised the move to allow mortgage companies to operate current accounts to attract low cost customer deposits.

Mr Ireri said on Monday that this would unlock the potential for mortgage firms by enabling them increase their lending capacity and potentially lead to the lowering of interest rates on mortgages.

“This gives us the potential to reduce interest rates on mortgages and especially once we reach a critical mass in terms of current accounts we will be passing this on to our customers,” Mr Ireri said.

He said there was a huge potential in the property market characterised by demand that currently outstrips supply particularly in urban centers.

Figures indicate that 150,000 new housing units are required in urban areas every year yet only an estimated 35,000 are produced. This has led to overcrowding and proliferation of informal settlements in urban areas.

In the 2010/2011 financial budget, Mr Kenyatta proposed the reduction of stamp duty on mortgages, charges and debentures from 0.2 percent to 0.1 percent aimed at encouraging borrowing against owned property.

Mr Ireri however points out that the government ought to have addressed the four percent stamp duty charged on property transfers by local councils arguing it would spur more interest for first time homeowners.

“This proves challenging for first time homeowners who will be slightly disadvantaged against existing property owners,” he said.

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There is also the move to raise the threshold of core capital commercial banks are allowed to invest in mortgage finance from 25 percent to 40 percent.

Contrary to speculation in the market that this would create competition amongst commercial banks and housing financial institutions, Mr Ireri said this presents an advantage to property owners.

He said the mortgage potential in the property market was bigger than a single company could afford to lend.

“The focus should instead be on the availability and ability of Kenyans to be able to get a mortgage to buy their first home,” he said.

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