By Mary Ndung’u
The Kenyan housing sector is extremely ripe for profitable involvement and participation by the various players in the property value chain.
From the soon to be launched Kenya mortgage refinance company (a concept developed and currently in the process of implementation by the National treasury), to the government’s big four agenda that includes housing right up to the huge innovations made in developing affordable housing , the country has seen a lot of discussions and planning geared towards affordable housing.
Housing units are generated as part of a property value chain that includes developers, contractors, consultants, financiers, property agencies and the final residents.
Saccos have over the years been involved in the property sector and taken key roles as player in financing as well as in property development.
In fact for some of the now regulated Saccos sizable parts of their investments and asset base was in real estate.
However with the coming into place of Sacco Societies Regulatory Authority (SASRA), new requirements emerged some of which had a direct impact on the investment activities that Saccos could be involved in.
According to SASRA, investments in land and buildings shall not exceed 5 per cent unless a waiver is given by the Authority.
A profitable niche for Saccos lies in the role of financing of housing projects through mortgage.
This will give the Saccos a strong opportunity to strengthen their position as housing financiers in the country.
Research has shown that Saccos and housing Co-operatives are the main providers of housing finance in Kenya.
It is reported that these institutions provide 70 per cent or more of all housing credit through smaller formal mortgage loans and larger amounts of unsecure loan loans for self-construction.
Traditionally formal housing mortgages have been provided by the commercial banks with the Saccos playing the same financier role but in more unstructured lending that was not necessarily in the form of mortgages.
There are a few key things that Saccos can do to prepare to play in the formal mortgage lending field.
These include market research, product development, internal capacity building, and strategic partnerships with key players in the housing industry and aggressive marketing campaigns.
They need to conduct their own market research with a view to understand the need of their various member segments and potential mortgage loan clients.
This research will be a source of credible and relevant market intelligence that will inform the kind of mortgage products each Sacco offers to its members.
Once the market research is conducted, the Sacco will now be in a position to develop product concepts that clearly stipulate the kind of mortgage loans that they offer.
To do this, the societies must invest in organisational capacity.
Training will need to be planned for and a lot of coaching of staff provided to those involved in market research, product development and credit mortgage loans origination.
They will also need to identify credible and efficient strategic partners to support the housing mortgage wing.
Some of these include legal counsel firms, valuers, and organisational development consultants and financial analysts.
These will provide highly needed technical guidance, which the Sacco may not otherwise have the capacity to obtain in-house.
Aggressive marketing of the mortgage products will also be useful to ensure reasonable uptake by the Sacco members.
This will be key because there lies a lot of potential for development partners and private sector to have a positive impact on Sacco’s mortgage lending.
Hence it will be important to show reasonable numbers of mortgage loans issued as useful indicator of impact.
A good example that clearly shows need for Saccos to drive high uptake of their mortgage loans is one of the quantitative standards that the national treasury backed Kenya Mortgage Refinance company (KMRC) set as an eligibility criteria.
Participation in KMRC loan programme will be open to institutions that meet the qualifications set by the company one of which is volume of mortgage lending.
Ms Ndung’u is a business development specialist, trainer and research consultant working within the Sacco Sector.
