Category Archives: Kenya mortgages

Mortgage Refinance and Amendments to The CBK Act, 1966

Via a legal alert from Oraro & Company Advocates: The Finance Act, 2018 which was assented to on September 21, 2018, amended the Central Bank of Kenya (CBK) Act, 1966 to regulate Mortgage Finance Businesses (the business). The amendments include having new definitions and the introduction of new powers to the CBK. These amendments came into effect on 1st October, 2018.

New Definitions

  • A Mortgage Refinance Business is defined as the business of providing long-term financing to primary mortgage lenders for housing finance and any other activity that the bank may prescribe from time to time;
  • Mortgage Refinance Company means a non deposit-taking company established under the Companies Act of 2015 and licensed by the CBK to conduct mortgage refinance business;
  • Specified Mortgage Refinance Company means a licensed mortgage refinance company licensed under the CBK Act.

Increased CBK powers

With the introduction of new sections, CBK will now have the power to license and supervise the business. This includes:

  • Determining capital adequacy requirements;
  • Prescribe minimum liquidity requirements and permissible investments for the business;
  • Supervise the business by conducting both on and off-site supervision;
  • Assess the professional capacities of persons managing the business;
  • Approving the board management of the business;
  • Approving the appointment of external auditors;
  • Collecting regular data from the business;
  • Approving the annual audited accounts of the business before publication and presentation at the AGM;
  • Revoke or suspend a license;
  • Receiving reports from the Mortgage Refinance Business.

These are extracts from other documents from Oraro & Company with detailed implications of the passing and presidential assent of the Finance Bill 2018.

World Bank Reduces Kenya Economic Forecast

A new report from the  World Bank slightly revised down the forecast for Kenya economic growth from the 5.9% achieved last year to 5.5% in 2017. This is attributed to ongoing drought, depressed private sector growth, and rising oil prices while 2016 had low oil prices, tourism recovery, and favourable weather conditions.

At the launch, Central Bank Governor, Patrick Njoroge said the focus should not be on the rate change, but on the medium term in which Kenya’s economy had distinguished itself by its resilience. This comes from Kenya having a highly diversified economy  – a mix of largest export is tea but his tea, and that goes to Egypt (not the UK), the economy has a strong regional focus (25% of exports are to EAC, and 40% to sub-Saharan Africa), a dynamic private sector (that’s becoming more transparency, with good governance & better business models), a well-educated labour force and investments in infrastructure (he said more should be written about the SGR vs. the old lunatic express railway) which will improve the country’s competitiveness. He said that foreign exchange reserves were at an all-time high (5.3 months) and while rains had failed in 2017 and there was a slowdown in bank lending, the risk of Brexit to Kenya was more on foreign direct investment (FDI) side and less on exports.

At the launch, the World Bank also did a report on housing in Kenya titled unavailable and unaffordable that highlighted that there were fewer than 50,000 new houses being built each year compared to an annual demand for 200,000 homes. Also, there’s low financial participation with fewer than 25,000 mortgages in the country, yet mortgages are one of the most secure loans, as people do not default on their homes easily.

The World Bank proposes having a Kenya mortgage refinance company (KMRC) that adapts from other successful models in Malaysia, Morocco (guarantees for 70% of loans) and Nigeria (fully subscribed bond scheme) to see if the number of mortgages in Kenya can go up to 60,000. They also have a private-public partnership at Naivasha in Nakuru County to build 1,000 low-cost homes, most of which will be below Kshs 2 million (~$20,000)

Also see a report of an IMF staff visit to Kenya.

Real Estate Moment: TJRC, Homes Expo, Bubbles or Boom

TJRC: Two weeks ago, Kenya’s Truth Justice & Reconciliation Commission handed its completed TJRC Report to the President concluding three years of work in which the committee set out to document violations of human rights, abuse of power and misuse of public office since Independence and look at solutions that may be beyond the reach of the judicial system to addresses and restore.

They collected over 42,000 statements around the country and, at 41%, land and property issues topped their list of violations, far ahead of the next four issues (extra judicial killings, serious injury, persecution, torture) combined.

Homes Expo: The Homes Expo took place in Nairobi last week and some properties and exhibitors at the Expo included:

– AMS Properties has Five Star Gardens on Mombasa road with 2 and 3 BR apartments for  Kshs 5M and 7M respectively.
– Bluebell have 3BR apartments in Kileleshwa and Westlands for Kshs 18.5M and Kshs 24.5M  respectively
– The Cullinan will be full service apartments coming up next to Casabalanca in Kilimani/Yaya area and will have 1 bedroom apartments that range from Kshs 10M for 1 bedroom to Kshs 22M for 3BR ones
–  Imara Gardens on Mombasa Road have 2 and 3BR apartments at Kshs 6.8M and Kshs 7.8M respectively.
– Legacy Apartments being sold by Hass Consult are studio, 1 and 2 BR apartments on Naivasha road (minutes from the Junction Mall ) for Kshs 3.5M, 5M and 7.25M respectively ($85,300) 
– Peony Estate by Gao Yu comprise 100 homes with apartments that cost Kshs 17 million ($200,000) and Penthouses  for Kshs 30M in Lavington
– Victoria Villas are 4 BR houses in Kisumu for Kshs 10.5M

– Diani Homes have properties in Mombasa, Lamu, and Diani
– The Kenya Ministry of Lands has constructed 600 3BR apartments in Kibera – Soweto East 
– Anza and Pam Golding Properties (with an app in the android store) enable property sellers to show 360 view of their properties online for interested buyers. This eliminates an inconvenience when showing a proprty that is currently occupied by tenants
– Also at the expo were supermarkets like Tuskys and Nakumatt offering home furnishings and other companies like LG who displayed their Kshs 1.8 million 3D TV 
Financiers at the expo included
– Barclays has a 15.9% fixed rate mortgage for the first three years and maximum mortgage durations of 20 years. So a Kshs 10M ($120,841) mortgage attracts repayments of Kshs 138,000 ($1,662) per month
– CBA has 25 year mortgages in shillings, US dollars, Euros and Sterling Pounds
– Co-Op Bank has good home mortgages that range between 12.75% to 14.75%
– Family Bank has mortgages as low as Kshs 1M ($12,048)
– I&M mortgages are at 16%
– KCB give mortgages of up to 25 years for home buyers, while those for investments are up to 20 years. Real estate developers get finance for up to 2 years with 85% finance and investment groups get up to 19 years with 80% financed – all with loan rates starting from 13.5% up
– National Housing Corporation has 13% to individuals   
Standard Chartered has 14.9% mortgages and finance properties up to Kshs 100M ($1.2 million) and these are also available to expatriates and non-residents –e.g. to own a holiday or investment home

Other Real Estate Blogs

– Contrarian Kenyan advises why you should invest in REIT’s (Real Estate Investment Trusts) rather than in empty plots on the highway  as they offer better liquidity and diversity, but with less bureaucracy. 

– George Adulu  looks at common dilemma of many people who are paying rent in a house, but take mortgage land to build a home by borrowing to buy a plot of land to develop at some point in the future

– He also looks at the  buy to let  prospect of buying a property to rent out for income, but notes that, with the high interest rates, it only makes sense if you put down a sizable down payment, not the 10% that mortgage companies tease with. Also  if you are thinking about a property for purely rent income, then forget about the suburbs, instead head to densely populated parts of Nairobi and other urban centers. You will be shocked to know that hose single roomed units in those multi-storied buildings in Umoja, Dandora, Kayole, Embakasi and so on have a repayment period of less than 10 years.

Other Real Estate News

– Bad Debts : The construction, building and real estate sectors topped the list of sectors with biggest loan defaults in the first quarter of the year.
– Construction Jobs: The construction sector generated new jobs at the fastest pace in the five-year period to 2012. 
– Listed Property Company? Home Afrika plans to list on the Growth Enterprise Market Segment (GEMS) at the Nairobi Securities Exchange. The firm, with 128 shareholders, has projects under construction valued at over Kshs 12 billion such as Migaa (golf estate in Kiambu) Lakeview Heights (Kisumu), Llangwe (Kwale) and Kikwetu (Machakos) financed through shareholder funds and loans
– Succession:The Delamere Family is subdividing a Naivasha Estate as part of a succession plan involving grandsons of the settler farmer. 
– Unaffordable Homes: Owning a home in Kenya has become harder owing to the cost of finance. Still ccommercial banks had Kshs 122.2 billion ($1.5 billion) worth of home loans held in 19,177 accounts. (19,000 mortgages in Kenya)


The Kenya Banker’s Assocation CEO Chat series in May 2013  featured (PDF) Barclays Kenya CEO Jeremy Awori, and it focused on mortgages (PDF) 

Strathmore University has a course on Construction Project Management in June and another for Real Estate executives in July 2013.

Real Estate Moment: Property Expo, Bubbles, Mortgage Rates

A Homes expo took place  last weekend at KICC. Around that, other real estate matters include:
Mortgage rates down: The launch of the quarterly HassConsult property report showed  that the average mortgage interest rate in Kenya is now 19%, down from 22.5% three months ago. 
A Diaspora SACCO was launched with a view towards investing in real estate.
Aground breaking was held for the recently announced next phase  of the Nairobi Business Park which will comprise 15,000 Sq.M of space for restaurants, a fitness centre and convenience stores. At the event, Mugo Kibati the Director General of Vision 2030 said that the property industry accounts for 5.3% of Kenya’s GDP.
Exotic Marketing: Recognizing a challenge that homeowners face by moving further from the city, some developers now advertise themselves in terms of proximity to essential service centres. e.g. Olive Tree apartments [3Br for Kshs 7M] on Kiambu Road list about 5 schools, a mall, hospital and bus stop near the complex.
Kahawa – by @TheMumbi
Others advertise their properties on trucks, on large roadside billboard, in bank halls, have scheduled bus tours for prospective buyers to view the upcoming properties, or send out targeted promotions aimed at the ‘laptop and latte’ class [“Legacy Apartments (starting at Kshs 3.95M in the Dagoretti area] or proximity to high altitude [Serene Valley Properties, Sigona Valley – 3 and 4 bedroom villas in three different house designs costing between KShs 16M – 19M.

Land Bubble: According to an A4Architect Q&A, construction costs have not changed much it it’s land prices that have. Elsewhere they note an infrastructure effect on land prices which can be as much as 1,000% compared to 100% for other land prices over a short period. 

Coast Concern:
However at the Kenya Coast, it seems to be the other way as  land issues are among the key grievances that have resulted in unrest and recent attacks on police and politicians.

Expo: Using a 3 bedroom apartment or 3 bedroom house for comparison and with the US dollar exchanging at about 85 Kenya shillings, some properties and exhibitors at the Expo included:

Home Expo, Nairobi October 2012
– The Prism (model drawing below) by Kings Developers will be a new office block on one of the  Ngong Avenues in Upper Hill
– Dara Springs by the China Young Tai Co has 3BR Apts in Kileleshwa for Kshs 17M and they are also developing 6BR townhouses at Karen Splendour to sell at  Kshs 95M
– Imara Gardens are 3BR Apts in Imara Daima for Kshs 7.8M

– Edenville in Kiambu from HassConsult has 3BR Camellia Villa’s for Kshs 13.5M
– Chania Gardens in Thika have 3BR maisonettes for Kshs 8M
– Sahara Ridge in Ruiru have 3BR maisonettes  for Kshs 9.5M at Hass Consult
– Canary Springs are 3BR Apts in Ruaka for Kshs 7M 
– GreenPark Estate from Superior Homes  (winner of Best Development in a 2007 International Property Award)  is a managed estate
– Lukenya Hills have 3BR bungalows for Kshs 6M in Mlolongo, by SJR who put up the Safaricom headquarters buildings
– 360 Degree Court are apartments in Syokimau for Kshs 5.5M by Kings Developers

– Jacaranda Gardens off the Northern Bypass are 3BR Apts for Kshs 7.6M – built by the Sietco & the Chengdu Jiangong 3rd Investment Company
Out of Nairobi
– Milimani Apartments in Nakuru by Kings Developers have  3BR Apts for Kshs  4.5M
– Konza  ½ acre plots for Kshs 2M from Petu Properties and these are 11 Kilometres from the Malili technology city which, along with Tatu City (on Thika Rd), are two new cities planned to be built near Nairobi

– Investment & Mortgages Bank
– KCB’s Savings & Loan has finance of  13.5% available up to 25 years for ready built or for construction of homes. A Kshs 8.5M (~$100,000) home will attract monthly repayments of Kshs 195,000 over 5 years or Kshs 99,000 (~$1,160) if paid over 25 years.
– National Bank  has mortgages of up to 20 years at 15%, with up to 90% finance.
Planned Prism Tower
– Standard chartered has mortgages at 14.9% and a Kshs 8M loan can be repaid over 5 years at Kshs 189,000 or Kshs 104,000 (~$1,220) per month over 20 years.

The Mortgage Company (TMC) is a mortgage broker that help home buyers source loans from different banks. TMC, with it’s partners Oaks Construction and Rafiki Microfinance also has a  makazi mema program that aims to  finance and construct houses within 6 months for maisonettes (and bungalows in 4 months) with the building cost of a 3BR home being about Kshs 2.4M ($28,000)
Savannah Cement is the sixth cement company in the country – and they have two brands of cement, one of which costs Kshs 670 ($7.90) for a 50Kg bag 

The Kenya Revenue Authority had at the stand there. Their brochures note that property owners in the Diaspora who rent our property in Kenya are meant to pay income tax in Kenya on their rental income. 

Real Estate Moment: Ghana Cities, Old Taxes, & Pricey Mortgages

Ghana Cities: Last weekend, in Accra, the Renaissance Group launched two new cities that they plan to represent the future of urbanization in Ghana. The cities will be mixed-use areas where residents will live work and play and are in the same vein as Tatu City that was launched in Kenya, but which has been embroiled in a shareholder court case that has affected the pace of the project.The concept of new cities that Renaissance is planning in Ghana, Kenya (Tatu on 2500 acres for  70,000 people),  Zambia (Roma park) and the Democratic Republic of Congo (Kiswishi on 6900 acres in Lubumbashi to break ground in 2012) are based on some harsh realities:

  • That African cities are fast growing (there are now 52 cities with over 1 million people), attracting rural migrants in search of employment and opportunity.
  • There is a shortage of housing that is quality or decent, and many city developments are unplanned.
  • Also, the infrastructure in many of these cities is lagging  and authorities will not be able to supply the services or utilities that residents need to have, while residents are facing ever longer commutes.

The two Ghanaian cities are King City (located 10km from Takoradi harbour in North Akase area) which will be built over 10 years in phases to house 90,000 people and Appolonia (located 30km from Accra and 20km from Tema Harbour) which will have retail and commercial developments on 2000 acres to house 88,000 people. Appolonia which is now having water & road development will break ground in 2013.

With both cities, local communities are investing their land in the deal. They are not selling, and remain as equity partners with a stake to get a return on their undeveloped land and create employment for the youth and Renaissance team estimates that Accra itself will need another 5 – 6 cities to absorb its fast growth.Both the cities will have high, medium, and low-cost housing units and as the local mortgage continues to develop, the Renaissance team expect that most people should be able to afford homes. Ghana now has mid-market mortgages accessible over 10 years for about 80,000 Cedi’s (~$40,000 or Kshs 3.3 million).

Other mega real estate developments, blogs & articles

Tips: Nahinga blogs about three real estate investing lessons from the Accra Mall project, that began in the early 1970’s namely

  • (Speculate)/purchase real estate in the direction that a City can grow towards.
  • Use professionals and maintain a high standard of quality.
  • Have an exit strategy.

Garden City: The real estate sector in Nairobi is attracting more PE interest, and Actis’ portfolio includes ten institutional quality assets in seven countries in sub-Saharan Africa. Following in that model, equity firm Actis and partners including Game are to develop Garden City  which will include homes, an events arena, and the largest retail mall in East Africa. It has already attracted MassMart from South Africa and it will break ground in December 2012. 

Other Mega project opportunities:

Railway prime real estate: The Kenya Railways Corporation plans to develop 385 acres of prime real estate land in Nairobi, Mombasa and Kisumu, and is seeking investors to build hotels, residential housing, light industries and shopping malls.

Kisumu Floatel: A project is seeking investors to establish a luxury passenger vessel as a 5-star floating hotel on Lake Victoria that will accommodate 80 passengers.

Cautionary Tale: But sometimes mega projects can go wrong like this ghost city built by Chinese investors in Kilamba, Angola.

Taxation Time: The Kenya Revenue Authority has published some recent notices about taxation of rental income and other income from real estate. While collection of value-added tax (VAT of 16% ) has observed in the commercial building sector, some residential owners have ignored that, while others have not been aware that they are also supposed to pay income tax that graduates from 10% on net rent income of up to ~122,000  to 30% on all rental income over ~Kshs. 466,000 ($5,600). There is also other treatment for non-residents, partnerships, estates of deceased landlords and Kenyans living in the diaspora, as well as tax incentives available for rental income on real estate investment trusts (REITs)  and on low-income housing projects (less than $20,000).

Nairobi Real Estate Price Index: Hass Consult have just released their second-quarter report on housing price trends.  They applauded the recent lowering of the Central Bank CBR rate (to 16.5%) as they noted that the impact of high-interest rates will continue to be seen in a slow down in new building amid the high finance costs. They also noted that, while the pace of building in Nairobi is at a peak, it’s still a fraction of the housing demand, and while projects are coming to fruition, new ones are not being started as people who would be buying homes are instead staying in rental properties longerThe release of the report was sponsored by The Mortgage Company, a mortgage brokerage firm who also released a mortgage rate sheet for consumer comparison and which showed I&M bank had the lowest mortgage rates of 18%, while Equity, CBA and Family Banks had the most expensive at 24%.

Mortgage Chat: The Kenya Bankers Association which is turning 50 this year, just re-branded and launched a new outlook and new website. One of their new outreach programs will be a weekly mychat session with a bank CEO, and in a few weeks time,  they will feature Frank Ireri, the Managing Director of Housing Finance bank, who will chat about mortgages.TV Time: Finally, there will be a new TV show coming to NTV in Kenya that will be devoted to real estate and will air on Sunday afternoons in a few weeks time.