According to state run, National Housing Corporation, the estimated current urban housing needs are 150,000 units per year to cater for the backlog. However, it is estimated that the current production of new housing in urban areas is only about 30,000 units annually, a shortfall of 80 per cent.
“For a long time the government had exited the housing sector, I am not surprised that it took them coming into the sector they could only do a few units but they need to think more widely and probably provide capacity to developers, provide developers incentives to these constructions,” Njoroge Nganga CEO at Home Afrika told CNBC Africa.
A survey by the country’s central bank revealed there were less than 20,000 mortgage loans in the country in 2013, a fraction to that of the population of the capital city Nairobi at over four million.
“The mortgage market has tended to focus on the employed and in the informal sector those who have proof of income. They have to find more innovative ways to prove peoples income and also innovate the products in such a way there is an incremental pay off of the mortgage,” Nganga said.
The government recently introduced a new base rate, Kenya Banks Reference Rate (KBRR) at 9.13 per cent for all commercial banks’ lending rates. The KBRR is expected to lower high interest rates. The central bank is expected to issue this rate after every six months with banks tracking the KBRR and then pricing their loans.
According to Nganga, the government should look for ways to help developers bridge the deficit of houses “through the medium of an infrastructure fund which then takes away the burden from developers.”
However, during the East African nation’s budgetary address, the government stated they will increase duty on imported steel to 25 per cent on protectionist grounds.
In June, the country’s cost of living went up marginally as a result of a number of factors including the increase in housing from 7.39 per cent compared to last month’s 7.30 per cent.