, NAIROBI, Kenya, Feb 4 – Experts in the real estate and financial sectors have challenged the government to come up with housing savings schemes to help bring down the cost of mortgages in the country.
Asset Manager at the Zimele Asset Management Company Sammy Muvelah says the government should set up State regulated funds where citizens can save and borrow money at cheaper rates just like Saccos operate.
Muvelah said the country needs to stop blaming commercial banks for the current high mortgages adding they were not in a position to bring a solution any time soon.
“The banks have to weigh the opportunity costs between lending money to a mortgage and lending to enterprises. And the thing is that a bank would only want to lend to a mortgage if it can pay as much as in a commercial loan,” Muvelah said during a budget forum meeting at a Nairobi hotel.
He says Kenyans currently have the capability of saving more than Sh5 billion through such a housing savings scheme.
“Imagine if everybody with an income could save a Sh1,000 a month and after sometime is guaranteed of borrowing millions at cheaper rates. Some may feel like Sh1,000 is a lot but in most cases, we find ourselves spending the amount daily without accounting for it,” Muvelah argued.
He also called on the government to introduce tax reliefs as way for encouraging more people to take mortgages; a tool he said works in most countries.
“If you say you will give a tax relief of Sh5,000 a month for anyone paying mortgage, many will be attracted. The challenge we have is that the taxes remain high, so many fear taking mortgage so that it does not eat into their basic needs,” he said.
The average mortgage lending rate by the end of 2013 stood at 16.89 percent with Standard Chartered Bank offering the most competitive interest rate of 13.9 percent.
Despite the Central Bank of Kenya (CBK) base rate being stable at 8.5 percent, five Kenyan commercial banks held on to mortgage rates priced more than nine percentile points above the base rate.
The banks with a spread of 9.5 to 10.5 percent points were Equity Bank, Family Bank, Chase Bank, Diamond Trust Bank and Consolidated Bank.
“This cost of financing is so high and it was time we look for a solution. We also have the issue of high land costs and expensive building materials, we can’t grow like this,” Kenya Property Developer CEO Robyn Emerson said.