The youth can tap into cheaper, flexible credit facilities offered by Saccos to enable many own affordable housing units and power up the government’s Big 4 agenda on housing, Mizizi Africa Homes has said today.
The developer challenged young people entering the job market, newlyweds, and young couples to take advantage of current lower interest rates and improved conditions to access development credit from Saccos.
Homeownership by youth is critical in helping them and their families gain a sense of stability and security and allow one to make an investment in their future to cushion against unexpected economic turbulence.
“Saccos are appreciating that most prospective homeowners find it difficult to get guarantors. They also understand that title deeds might not be out faster so they depend on the agreement signed between home buyer and real estate developers to structure credit before Title deeds are out to act as collateral,” said Mizizi Africa Homes Chief Executive Officer, George Mburu.
Over the last two years, Saccos have been adopting customized financing models that favor borrowers without guarantors.
He adds, “Lack of guarantors has been a challenge that previously made it difficult for Saccos to structure home loans but now we are seeing them embracing the idea that they can fund someone who wants an affordable house.”
Most Saccos in the market the developer said are embracing a new model of financing homeownership by allowing prospective homeowners to save for a specified period usually from six months and the current balance earns prospective borrowers up to six times the value of their savings to help them secure a home.
For instance, a prospective homeowner saving about Sh 700,000 in a span of six months can qualify for a loan of up to Sh 4.2 Million repayable in four to five years at 12 percent interest on reducing balance.
It means you get to clear loans even faster compared to the current 25-year term in commercial banks.
“This gives you a greater edge since you stop paying rent earlier and focus on reducing your loan balance that you can also restructure for those who have shown commitment in payment of their facilities since Saccos are not very strict,” said Mburu.
Kenya has more than 5,000 Saccos out of which 80 percent controls in excess of Sh600 billion in deposits with an asset base of more than Sh800 billion.
With interest rates on home loans reduced to 7 percent for Kenyan’s earning a salary of below Sh 150,000 a month through the Kenya Mortgage Refinancing Company (KMRC), the developer anticipates a rise in uptake of its affordable units over the coming months.
“This initiative will go beyond just housing more low-income Kenyans, it will also accelerate our pace of development, boost real estate sectors contribution to GDP, job creation and manufacturing output,” said Mburu.