Mortgages in Kenya: Opportunities, Challenges, and What the Future Holds

For many Kenyans, owning a home is a lifelong dream. Yet, despite growth in the real estate sector, the mortgage market remains small and inaccessible to most. According to the Central Bank of Kenya, as of December 2023, there were just 30,015 active mortgage loans in the country, valued at KSh 281.5 billion. This represents only about 0.11% of working adults — showing how limited mortgage uptake is compared to the housing demand.

The State of the Mortgage Market in Kenya

• Growth: The number of mortgage loans rose by about 8% between 2022 and 2023.

• Value: Outstanding mortgage loans increased by 7.5%, from KSh 261.8 billion in 2022 to KSh 281.5 billion in 2023.

• Defaults: Non-performing mortgage loans reached a record KSh 40.8 billion, or 14.5% of the mortgage book, largely due to rising interest rates.

While there has been some growth, the market is still very shallow compared to Kenya’s housing deficit of over 2 million units.

Why Mortgage Uptake Is So Low

1. High Interest Rates
   Mortgage rates typically range between 12% and 18%, making monthly repayments unaffordable for most households.

2. High Deposit Requirements
   Most banks require a 10–20% deposit upfront. For a KSh 8 million home, that means raising between KSh 800,000 and 1.6 million before even qualifying.

3. Income Verification
   With over 80% of Kenyans working in the informal sector, proving consistent income is a challenge, locking many out of formal mortgage financing.

4. Property Costs
   Land and construction costs, especially in Nairobi and major towns, push property prices beyond the reach of most low- and middle-income earners.

Key Players and Innovations in Mortgage Financing

• Kenya Mortgage Refinance Company (KMRC): Established in 2018, KMRC provides long-term funding to banks and SACCOs, enabling them to offer affordable home loans at single-digit interest rates.

• SACCO-backed Housing Loans: SACCOs have stepped in to provide more flexible financing options with lower interest rates compared to commercial banks.

• Tenant Purchase Schemes (TPS): Some developers now offer “rent-to-own” models where monthly rent goes towards home ownership.

Opportunities Ahead

Despite current challenges, the Kenyan mortgage market has significant potential if reforms continue:

• Affordable Housing Projects: The government’s Affordable Housing Programme is increasing the supply of lower-cost units, making mortgages more realistic for middle-income earners.

• Digital Lending Platforms: Tech-driven mortgage applications could streamline loan approvals and reach more people.

• Diaspora Investments: Remittances remain a key driver, with diaspora-focused mortgage products gaining traction.

• Policy Reforms: If interest rates can be lowered and more innovative financing models introduced, uptake will grow.

Challenges to Overcome

• Persistent high interest rates linked to broader economic conditions.

• Land titling issues that make securing collateral difficult.

• Limited awareness among Kenyans about available mortgage options.

• Economic shocks (inflation, job losses) that increase default risks.

Conclusion

Mortgages remain one of the weakest links in Kenya’s journey toward increased homeownership. With fewer than 1% of working Kenyans able to access them, the dream of buying a home on credit remains out of reach for most.

Still, the growth of institutions like KMRC, coupled with government-backed affordable housing and SACCO-driven financing, signals hope for the future. If reforms succeed in lowering costs and expanding access, Kenya’s mortgage market could finally unlock homeownership for the masses.