The demand for housing in Kenya currently is estimated to be at 150,000 units for urban houses and 300,000 units for rural housing annually. This creates a deficit of about 200,000 units for both rural and urban housing as the total annual housing supply stands at about 250,000 units.   With the growing rate of urban dwelling, the traditional idea of establishing a home in ones ancestral village is fast fading out leaving people locked up in their rented flats.

The situation has been made worse by the fact that there are relatively fewer housing units developed that target low income earners as compared to those developed for high end markets in the country. Lack of supply in the market has resulted in what Housing Finance Managing Director Frank Ireri describes as "developers selling to the highest bidder".

Mortgage brokerage

Recent housing developments by the likes of Jamii Bora Makao, Makao Mashinani and Rafiki Microfinance targeting low income earners have brought hopes for many middle level and low income earners to own their own homes. Some of these low cost homes cost from KES 1m to KES 5m for 1 bedroom to 3 bedroom houses.

Saving for such amounts of money could take a life time and this forces many home buyers to secure mortgages towards home ownership. Home buyers in the country have been subjected to high interest rates on the home loans since December 2011, averaging at 20% when the Central Bank base rent stood at 18%. The Monetary Policy Committee has since lowered the CBR to 16.5% but the rates on the market still average at 19%.

A fairly new idea of mortgage brokerage has emerged where a broker gets clients, shops around for the best rate on the market, validates property and then advises their client (home buyer) on what to take, at a fee. James Chege, Mortgage broker with Capital Investments says that the arrangement makes home ownership more affordable and enables a home buyer to avoid losing money to fraudulent deals.

This raises a question to whether or not this arrangement would benefit home buyers, putting in mind the high interest rates on the market? Jeremy Bundi, a Nairobi Real estate agent, expounds "The home buyer will be lured with rates, say of 13%-14% for the first year and they will end up paying normal rates on the mortgage because no one discloses to them that the mortgage is based on a fixed rate." Says Bundi. "It is business and the broker has to make his money when he takes clients to the lender."