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KILI: Why joint ventures are critical for affordable housing

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Why joint ventures are critical for affordable housing

The affordable housing agenda is part of
The affordable housing agenda is part of President Uhuru Kenyatta’s Big 4 Agenda. FILE PHOTO | NMG 

Millions of Kenyans eager for a break from the threat of a life-long rent burden have a reason to be optimistic following the inclusion of affordable housing as one of the governments 4 priorities.

The right to a decent housing by all Kenyans is a constitutional obligation. The 2010 Constitution of Kenya identifies access to adequate housing and to reasonable standards of sanitation as an economic and social right.

President Uhuru Kenyatta’s affordable housing programme seeks to ensure that 1 million Kenyan families become homeowners by 2020. There is already a backlog of two million houses countrywide and that deficit continues to grow by 150,000 units every year.

Annual construction remains a mere 50,000 units against a targeted provision of 250,000 units. Housing costs have risen dramatically due to the exorbitant cost of land, construction materials and labour.

As urban populations increase rapidly, developers continue to target the few upper-middle and high-income families because large housing units generate more profit. Lack of available land for affordable housing has also exacerbated the crisis.

Due to the shortage of affordable housing, many people are forced to live in poor conditions in informal units while overcrowding has led to the degradation of utilities and services including sanitation, water and roads.

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The affordable housing plan is therefore timely and necessary. Affordable housing is a complex matter and to increase the chances of success, it is important to draw lessons from the successes and failures of the numerous projects around the globe.

Similar projects that achieved a measure of success adopted joint approaches to financing, regulatory reform, incentives and the use of innovative planning and construction techniques.

Inadequate financing remains the key challenge to housing projects because housing is a capital-intensive sector. The Central Bank of Kenya reported that mortgage uptake has been on the decline with only 28,000 mortgages taken up in 2018.

Kenya Mortgage Refinance Company

The drop was mostly due to high interest rates, tight credit standards and liquidity issues including the long-term 18-month mortgage interest rates.

Establishment of the proposed Kenya Mortgage Refinance Company (KMRC) is anticipated to bridge the financing gap. KMRC will operate as a private sector driven company and provide secure long-term funding to mortgage lenders.

With joint shareholding, the government, pension and insurance firms, banks and venture capitalists can increase the affordability and availability of mortgage loans.

Pension firms for example can upscale the use of pension savings as collateral to provide members with low-interest loans against their retirement savings while at the same time increasing the share value of their social security savings.

It is critical for the government, through national and county government grants, to enroll multiple external financiers who can provide credit rates as low as 5-6 percent.

Private sector players will be able to draw the funds and offer developers and prospective home-owners longer-term mortgages at lower interest rates.

The writer is Group managing director of CPF Group.

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Kenya to import mitumba after coronavirus pandemic

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LUKE ANAMI

By LUKE ANAMI
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Kenya is set to lift the ban on imports of second-hand clothes once the Covid-19 pandemic is over, the Industry, Trade and Co-operatives Cabinet Secretary Betty Maina has said.

The Cabinet Secretary last Wednesday announced an immediate temporary suspension of the importation of second-hand clothes as a measure to stop importing the SARs-Cov-2 virus that causes Covid-19 disease.

Ms Maina said the action taken is in line with the conditions as set out by the Kenya Bureau of Standards (Kebs).

“The government has suspended importation of second-hand clothes with immediate effect to safeguard the health of Kenyans and promote local textiles in the wake of coronavirus,” said Ms Maina.

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“Most of the Mitumba imports come from China and Pakistan, countries which are the epicentre of the coronavirus pandemic. The decision is intended to safeguard Kenyans against the spreading of the coronavirus and is therefore a health issue,” she said.

In an interview with the The EastAfrican, Ms Maina said the Kebs will enforce the suspension as we wait for the situation to improve.

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“It is a requirement by the Kebs to take such an action in times of an epidemic like the Covid-19,” she said.

A recent study by the US Centres for Disease Control and Prevention shows that the virus can stay longer on different surfaces, including clothes.

Ms Maina, however, said the temporary ban will not in any way affect the policy on Mitumba imports from the US.

Under the African Growth and Opportunity Act, Kenya sold about Ksh40 billion ($400m) worth of textiles and clothing to the US.

“This does not in any way affect our policy on our imports from the US. The decision is strictly an urgent measure to curb the spread of the coronavirus,” added Ms Maina.

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World Bank pushes G-20 to extend debt relief to 2021

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World Bank Group President David Malpass has urged the Group of 20 rich countries to extend the time frame of the Debt Service Suspension Initiative(DSSI) through the end of 2021, calling it one of the key factors in strengthening global recovery.

“I urge you to extend the time frame of the DSSI through the end of 2021 and commit to giving the initiative as broad a scope as possible,” said Malpass.

He made these remarks at last week’s virtual G20 Finance Ministers and Central Bank Governors Meeting.

The World Bank Chief said the COVID-19 pandemic has triggered the deepest global recession in decades and what may turn out to be one of the most unequal in terms of impact.

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People in developing countries are particularly hard hit by capital outflows, declines in remittances, the collapse of informal labor markets, and social safety nets that are much less robust than in the advanced economies.

For the poorest countries, poverty is rising rapidly, median incomes are falling and growth is deeply negative.

Debt burdens, already unsustainable for many countries, are rising to crisis levels.

“The situation in developing countries is increasingly desperate. Time is short. We need to take action quickly on debt suspension, debt reduction, debt resolution mechanisms and debt transparency,” said Malpass.

ALSO READ:Global Economy Plunges into Worst Recession – World Bank

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Kenya’s Central Bank Drafts New Laws to Regulate Non-Bank Digital Loans

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The Central Bank of Kenya (CBK) will regulate interest rates charged on mobile loans by digital lending platforms if amendments on the Central bank of Kenya Act pass to law. The amendments will require digital lenders to seek approval from CBK before launching new products or changing interest rates on loans among other charges, just like commercial banks.

“The principal objective of this bill is to amend the Central bank of Kenya Act to regulate the conduct of providers of digital financial products and services,” reads a notice on the bill. “CBK will have an obligation of ensuring that there is fair and non-discriminatory marketplace access to credit.”

According to Business Daily, the legislation will also enable the Central Bank to monitor non-performing loans, capping the limit at not twice the amount of the defaulted loan while protecting consumers from predatory lending by digital loan platforms.

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Tighter Reins on Platforms for Mobile Loans

The legislation will boost efforts to protect customers, building upon a previous gazette notice that blocked lenders from blacklisting non-performing loans below Ksh 1000. The CBK also withdrew submissions of unregulated mobile loan platforms into Credit Reference Bureau. The withdrawal came after complaints of misuse over data in the Credit Information Sharing (CIS) System available for lenders.

Last year, Kenya had over 49 platforms providing mobile loans, taking advantage of regulation gaps to charge obscene rates as high as 150% a year. While most platforms allow borrowers to prepay within a month, creditors still pay the full amount plus interest.

Amendments in the CBK Act will help shield consumers from high-interest rates as well as offer transparency on terms of digital loans.

SEE ALSO: Central Bank Unveils Measures to Tame Unregulated Digital Lenders

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