An upmarket residential house/FILE
Speaking to Capital Business on Tuesday, Housing Ministry Permanent Secretary Tirop Kosgey said the trend of interest rates increasing by close to five percent is not sustainable as it will negatively affect the economy.
“We are actively engaging to determine the best approach to this (interest rate). Left unmitigated this will have unfavourable effects on the sector. It will definitely impact on repayment capacities by developers and mortgage takers and also discourage uptake and reduce demand for mortgages,” he said.
Higher repayment requirements are expected to put pressure on incomes to come up higher, which Kosgey noted will subsequently affect the current heightened tempo in the delivery of housing.
Among most big banks, the average interest rate currently stands at 24 percent, which is an increase of nine percent in the last month.
The Housing Ministry has been engaging developers to commit resources and take up more mortgages among other measures Kosgey said are being taken to mitigate the effects of the high interest rates.
“We are discussing with mortgage institutions whether they can reduce their margin because we believe this may be a short term measure that our economy will be able to peak,” he said.
As for interventions by the government, Kosgey suggested an element of fiscal incentives to support mortgage holders to avoid default, which he says is being considered.
The cost of housing has steadily risen in the last decade, for instance rents have increased 2.45 times since 2001.
Property values for standalone houses have seen a 10.6 percent increase in the last year, with the average price currently at Sh31.4 million up from 8.8 million in December 2000.
Apartments that made up 56 percent of the property market in 2010 registered an 11.7 percent rise in the last year with the average rent for a one to three bedroom property currently at Sh55,000.
The effect has caused renters to make a downward shift on the accommodation ladder, with the local rental market registering few gains in the third quarter for 2011.
Considering that there is no true figure quoting the number of houses in the country, the ministry will be undertaking nationwide housing survey to determine baseline information on the housing situation.
“The survey will give us the true position in terms of delivery. We will inform the sector much better, and we are working with stakeholders to ensure we come out with statistics on the housing sector by the middle or end of next year,” Kosgey said.
The Building Code that has been awaiting a much needed makeover, Kosgey said, is currently going through review under the National Building Regulations that will see the code move from being prescriptive to more performance based.
The Code, which is in its final draft stages, is up for review by various industry players at the Ministry of Housing’s Stakeholders Conference set for November 23.
