In recent years, Kenya has made notable strides in attempting to improve access to homeownership, especially for low- and middle-income earners.
Government-led programs such as the Affordable Housing Programme (AHP) and mortgage subsidies through institutions like the Kenya Mortgage Refinance Company (KMRC) were designed to make home loans more attainable.
Despite these efforts, a significant portion of Kenyans still finds it difficult if not impossible to qualify for or secure home loans. So, why does homeownership remain elusive even with subsidized interest rates?
1. Low and Irregular Incomes
One of the biggest obstacles is the mismatch between mortgage requirements and the actual earnings of most Kenyans.
While some mortgage plans offer interest rates as low as 9%, far below market rates, banks still require proof of consistent income to approve a loan. Many low-income earners, especially those in the informal sector, lack regular payslips or employment contracts.
As a result, even though they may be able to afford modest monthly repayments, they are excluded from financing options simply because they don’t meet the traditional criteria of financial stability set by banks and mortgage institutions.
2. High Deposit Requirements
Even subsidized mortgages often require a down payment typically ranging from 10% to 20% of the property value.
For someone looking to buy a home valued at KSh 2 million, a 10% deposit amounts to KSh 200,000 an amount that is difficult for most to raise, especially without access to long-term savings or credit.
For many aspiring homeowners, the lack of capital for the deposit is a dealbreaker, regardless of the reduced interest rates on the mortgage itself.
3. Strict Credit Scoring Systems
Access to credit is heavily tied to an individual’s credit history. Unfortunately, many Kenyans either have no credit record or a negative one, owing to small unpaid loans or late payments on mobile lending platforms. These black marks can make it hard to access formal mortgage financing.
Banks remain risk-averse and rely heavily on credit scores and banking behavior, locking out large portions of the population who are financially active but outside the formal credit system.
4. Limited Mortgage Options for the Informal Sector
Kenya’s informal sector employs over 80% of the workforce, yet most housing finance solutions are designed with formal employment in mind. Few financial products are tailored for people who earn through small businesses, farming, or gig work.
Even though many of these individuals generate adequate income to afford mortgage repayments, their lack of formal documentation like bank statements, tax returns, or audited business accounts disqualifies them from the process.
5. Property Valuation and Collateral Challenges
Lenders require that the property being financed meets specific standards and is properly registered. However, many affordable housing units, especially those outside major urban centers, may not meet the bank’s valuation criteria or may lack full title deeds.
This makes it hard to use such properties as collateral, stalling the mortgage process before it even begins.
6. Fear of Long-Term Debt
Cultural attitudes toward borrowing and long-term financial commitments also play a role. Many Kenyans are wary of 15–20-year mortgage terms, especially when economic uncertainty, inflation, and job instability loom large.
For households already juggling school fees, daily expenses, and medical costs, committing to a two-decade loan even at a low rate feels like too great a financial risk.
7. Hidden Costs and Bureaucracy
Even with subsidized rates, securing a home loan involves additional costs such as legal fees, insurance, valuation charges, stamp duty, and administrative charges.
These hidden costs can amount to tens of thousands of shillings and are often not included in the loan. Furthermore, the process can be slow, bureaucratic, and discouraging—especially for first-time buyers.
The Way Forward
To make home loans truly accessible, the housing finance ecosystem must evolve to meet the needs of the average Kenyan. Some promising strategies include:
- Tailored financial products: Develop mortgage packages for informal workers with flexible documentation and payment plans.
- Micro-mortgages: Introduce smaller, short-term mortgage products for modest home purchases or incremental building.
- Government-backed guarantees: Provide loan guarantees for low-income earners to reduce the risk for lenders.
- Financial literacy programs: Equip potential homeowners with knowledge about credit management and mortgage processes.
- Innovative financing: Explore cooperative housing models, rent-to-own schemes, and employer-backed home loan programs.
Subsidized interest rates are a step in the right direction, but they are not a silver bullet. To truly unlock homeownership for low- and middle-income Kenyans, the country must tackle the deeper structural, financial, and social barriers that limit access to mortgage financing.
Only then will the dream of owning a decent home become a reality for the majority.
