For many years, the Kenyan Housing market have been associated with government agencies such as HF Group, the National Social Security Fund (NSSF) and the National Housing Corporation (NHC), an alternative payment method for property acquisition whereby the home buyer makes a down payment and is able to access the facility before fully paying for it within an extended period of time.
Most developers in the market tend to shy away from the model as it ties down their cash flow. However, with the many housing developments coming up, and many new and unoccupied residential houses within Nairobi and its environs, tenant-purchase scheme may just be the right model to adopt.
The insatiable appetite for tenant-purchase schemes in Kenya’s real-estate market is without question.
There is no surprise therefore when corporates dealing with real estate choose to adopt the tenant purchase scheme- if only to satisfy their client base. Even more so since they offer flexible payment plans depending on the different pricing. However, it is for this reason that developers still seem to shy away from the scheme as it denies them instant access to cash.
It is also important to note that even when the home buyer has the privilege to access the property, they do not have full ownership of the property until they pay in full. A feature that disqualifies the home buyer from venturing into bank loans and mortgages, the scheme will give the developers an upper hand as the demand is high and only a few offer the scheme.
Besides Fusion Capital and SIC; NHC, NSSF and HF Group are operating the schemes. However, their models tend to favor salaried individuals; mainly civil servants.
SIC chairperson Mackrine Abukah recommends that private real-estate developers in Kenya open a window to tenant-purchase schemes to accommodate business people and the self-employed who have no salary but make money within the month.
According to an annual publication of the Oxford Business Group, Kenya’s housing deficit is estimated at 200,000 housing units per year, a figure that local developers and the government are unable to meet due to the strict demands and processes attached to mortgages.
Moreover, it is wise before getting into a tenant purchase scheme to work out the cost of the unit under tenant-purchase agreement in terms of the interest and then look at its cost under a mortgage facility and see what favors you most.
One should also analyze the contracting process to check the duration of payment. Issues such as related transactions like legal and administrative costs, including any payable taxes should also be taken into account.
Full ownership of the house under tenant purchase scheme is only acquired after the full payment of the total cost of the house. It is only after this that one can use the house as collateral for credit.