Mortgages are a luxury only the rich can afford. If you don't believe it, consider this: Kenya has a population of about 41 million. If you disregard people below the age of 18, retirees and the self-employed, this leaves about 2 million people in the formal sector (based on 2011 Parliament employment records). Surprisingly enough, only 20,000 mortgages have been taken over the past few years. This means that most Kenyans cannot afford to take a mortgage.

Greedy Developers

In any case, the common man is often misrepresented whenever there are profits to be made. Every so often, the big wigs in the real estate sector fail to see the value of low-cost housing. Given the recent luxury housing boom, some investors would rather charge steep prices for a lavish apartment than lease a one-bedroom flat to a low-income earner.

Insufficient Income

To make matters worse, taking a mortgage seems like something only the upper middle class can afford. A basic mortgage requires a deposit of between 10% and 20% of the property’s value. A bank or a mortgage lender foots the rest of the bill. The person buying the house must then pay back the loan under a specified interest rate over a period of time usually between 10 and 25 years.

This seems like a reasonable agreement but low-income earners may find it hard to deal with the interest rates, much less come up with the deposit. A UNICEF report even states that more than 50% of Kenyans live below the poverty line.

Solutions

Possible solutions for the disparity may include coming up with cheaper housing and lower mortgage rates. With this in mind, some developers have seen this as an opportunity to cash in on an untapped market. On one hand, developers like Makao Mashinani have started low-cost housing projects. The developer signed a KES 40 million deal with Shelter Afrique about a month ago. If everything goes as planned, 2000 homes will be available by the end of 2013.

But 2000 homes is barely enough to cater for millions of Kenyans living under poor housing conditions. According to a report by Shelter Afrique, 90% of Kenyans cannot even afford developer-built housing in its current form.

On the other hand, banks have been partnering with real estate developers to fine-tune the loan process. Capital Reality, for instance, works with CfC, Barclays and I&M Bank. The developer recently unveilled housing units worth KES 10.5 million with a 10% downpayment on a flexible mortgage. Bank mortgages average between 19% and 30% with I&M having the lowest rate at 18%. On top of this, banks like Equity have rolled out micro-mortgages for low income earners. A salary as low as KES 20,000 per month can get a mortgage with Equity for steel housing courtesy of Mabati Rolling Mills (MRM).

This however, does not cater for those living from hand to mouth. Some people's income is seasonal and unless more developers move towards cheaper housing, many Kenyans will keep living in dilapidated structures with little hope of ever owning a home. So, for heaven’s sake, give the poor man a cheaper housing loan.