Too many gaps in the National Housing Development Fund

By MUNGAI KIHANYA

The Sunday Nation

Nairobi,

21 May 2023

Many readers have asked me how the proposed National Housing Development Fund will work and I have not responded because I don’t know! I have tried to get a layman’s explanation but it is not forthcoming. Nevertheless, Charles Hinga, the Principal Secretary in charge of housing, was interviewed on one radio station and he gave some numbers.

First, the deduction will be 3 per cent of salary (not clear whether it is basic pay or gross earnings) subject to a maximum of Sh2,500 per month. In other words, those earning more that Sh83,334 will be deducted a fixed sum of Sh2,500. He estimates that the money deducted from employees will add up to about Sh9 billion per month.

These deductions will last for 7 years making a total maximum contribution of Sh210,000 per person. After that, the money will be given back to the contributor. It is not clear how much interest (if any) this money will earn during the 7-year period.

The PS added that the government has made concessions on land and taxes for the affordable housing project to bring down the average price of a house from about Sh11 million to Sh3 million. Private developers have been invited to participate in the developing these houses.

It is not clear why private housing developers are needed yet money is available and all that is required are building contractors. Still, government will buy the Sh3-million-houses from the private developers and sell them to Kenyans on a 30-year mortgage at 5 per cent per annum. The PS did not clarify what criteria will be used to select who can buy the houses. Basic calculations reveal that the monthly instalment of this Sh3-million loan will be about Sh16,100.

The PS also mentioned that government is targeting people who are currently spending Sh5,000 on rent. The idea being to offer some of the houses to them in an arrangement where they continue paying the same Sh5,000 for 30 years and end up owning the house. The price of such a house would have to less that one million shillings – around Sh925,000. Obviously, such a person cannot afford the Sh3-million house.

All in all, information about this housing development fund is scanty at best. The government needs to publish a simplified version of this fund explaining how the whole project will work. With so many information gaps, it is no wonder the public is sceptical.