Mengo NAIROBI (Xinhua) --
So many houses are being built in
Kenya’s capital Nairobi and other parts of the East
African nation, but Kenyans are not taking up mortgages
to buy them as banks tighten their purses following
introduction of interest caps.
New data from
the Central Bank of Kenya show on Wednesday that uptake
of home loans fell for the first time in a decade last
year even as property developers stepped up construction
of houses that include maisonettes, bungalows and
As of December 2016, there were 24,085 mortgage loans
in the market, down from 24,458 in 2015, a decrease of
1.5 percent due to tighter credit standards by
Kenya had 7,275 mortgage accounts in 2006, and they
have been growing steadily to hit 24,458 in 2015.
However, last year, uptake fell for the first time in
many years with the apex bank blaming it on the
introduction of rate caps.
"Commercial banks have introduced tighter credit
standards so the actual mortgage disbursements have been
lower than the increased demand.
"Most commercial banks have also shown preference to
offer short-term loans as compared to long tenure
mortgage loans," said the apex bank.
This is despite the fact that there is increased
demand for mortgage loans due to perceived affordability
after the introduction of interest capping law in
There is also increased appetite for mortgages as
more borrowers perceive that they can qualify for higher
Following the capping of interest rates, mortgage
charges stood at an average of 13.5 percent and ranged
between 11 percent and 18 percent as compared to 19
percent average with a range of 12 percent to 23 percent
The majority of those who took up the home loans
preferred those with fixed charges, according to the
About 62.1 percent of mortgage loans were on variable
interest rates basis compared to 89.3 percent in 2015.
"There seems to have been more uptake of fixed rate
mortgages by home owners after the introduction of
interest capping law," noted the bank.
The average mortgage loan size, however, increased
from 80,582 U.S. dollars in 2015 to 88,349 dollars in
2016 due to rise in property prices.
The value of mortgage loan assets outstanding rose
from 1.9 billion dollars in December 2015 to 2 billion
dollars in December 2016, representing a growth of 8.1
percent due to rise in house prices.
However, even as the value of loans rose, the
outstanding value of non-performing mortgages loans
nearly doubled from 114 million dollars in 2015 to 213
million dollars in December 2016 reflecting poor
"The non-performing loans (NPL) was 10 percent which
was above the industry NPLs to gross loans ratio of 7
percent," said the central bank.
Besides tighter controls, banks listed low level of
income, high incidental costs (legal fee, valuation fee
and stamp duty), high interest rate, lengthy process and
high house prices as other obstacles keeping Kenyans
away from mortgages.
Prices of houses that include bungalows and
maisonettes rose during the period to average between
64,000 dollars and over 130,000 dollars respectively.
The prices have risen ten-fold since 2000, blocking
thousands of potential buyers from the market, according
to an April report by the World Bank.
While the central bank puts decline of home loans in
2016 at 1.5 percent, World Bank economists noted that
mortgage lending dropped by two thirds following the
introduction of interest rate cap last year, pushing the
market to a 15-year low.
"I applied for a mortgage loan last December but to
date my application is yet to go through.
"I was keen on taking advantage of the low rates
following the capping of charges but it is clear to me
the bank may not approve it," said Collins Musyoki, a
media worker in Nairobi.
But as the mortgage market shrank, Kenya experienced
a real estate boom in 2016 as developers sustained
construction of residential and commercial buildings
amid rising rent and property prices.
In the capital Nairobi, according to the county
government, the value of residential units approved for
construction went up by about 8 percent, an indication
of property developers’ increased appetite.
The county government approved plans for houses
valued at over 2 billion dollars, up from 1.5 billion
dollars in the previous year.
"Even with drop in mortgage loans because of banks
tighter control, construction of houses will not stop
because property developers are renting some of the
units initially meant for sale.
"Besides, people are building their own houses to
save costs and at their own pace.
"The real estate sector would continue to grow," said
Antony Kuyo, a consultant with Avent Properties in