Ruto Housing Fund: How Much You'll Receive After 7 Years of 3% Monthly Salary Deduction

Affordable Housing Kenya
An illustration of the Affordable Housing Programme by Boma Yangu Initiative under the National Housing Corporation and President William Ruto (insert) on Tuesday, March 4, 2020.
Photo
Boma Yangu Kenya

Plans to increase the development and supply of affordable housing in the country on Thursday, May 4, took somewhat an auspicious tangent when Treasury Cabinet Secretary Njuguna Ndung'u proposed a 3 per cent deduction for all Kenyan employees.  

In Finance Bill 2023, Njuguna suggested amending The Employment Act, 2007, to compel employees to contribute 3 per cent of their basic salary to the Housing Fund.

Similarly, the employer must remit the same percentage towards the employee's Affordable Housing kitty, a programme that will run for seven years.

"The Employment Act, 2007, be amended by inserting the following new section immediately after 2007 section 31A- Deductions into the National Housing Development Fund. Cap. 117. 31B. (1) An employer shall pay to the National Housing Development Fund established under section 7 of the Housing Act, in respect of each employee. 

President William Ruto at the launch of affordable housing in Starehe March 6 2023
President William Ruto at the launch of affordable housing in Starehe on March 6, 2023.
Photo
PCS

"(a) The employer's contribution at three per centum of the employee's monthly basic salary; and (b) the employee's contribution at three per centum of the employee's monthly basic salary: 

"Provided that the sum of the employer and employee contributions shall not exceed Ksh5,0000 a month," read part of Finance Bill 2023.

Ruto's revamped program seeks to provide affordable housing solutions to low and middle-income earners who cannot access mortgage financing for home ownership.

The Affordable Housing Programme was one of the Retired President Uhuru Kenyatta government's Big Four Agenda items, which failed to provide 500,000 affordable housing units by 2022 as promised.

Fearing another spate of embarrassing failure, President William Ruto did place various measures to support the program, including tax incentives, subsidies, and partnerships with private sector developers. 

Calculating Contributions 

In the renewed strategy, the Kenya Kwanza government capped the total employer and employee contribution at Ksh5,000 monthly for seven years.

Arithmetically, Ksh5,000 per month for one-year totals Ksh60,000. The amount will only be accessible to the contributor after seven years.

After seven years, an individual employee shall have saved Ksh420,000. 

President William Ruto, Housing PS Charles Hinga and Machakos Governor Wavinya Ndeti going through housing plans on April 15, 2023.
President William Ruto (center), Housing PS Charles Hinga (right) and Machakos Governor Wavinya Ndeti ( standing next to Ruto) going through housing plans in Machakos County on April 15, 2023.
PCS

To participate in the program, individuals must meet certain eligibility criteria, including being a Kenyan citizen or a foreigner with a valid work permit, having a monthly income of between Ksh15,000 and Ksh150,000, and being registered with the National Housing Corporation (NHC).

The Fund is managed by the National Housing Corporation (NHC), which will receive contributions from employers nationwide.

Expert Opinions

However, sharing his views with Kenyans.co.ke,  Okowa Nashon, a financial analyst, raised pertinent questions on the programme's viability, which will likely face legal hurdles.

"If the government is serious about the Affordable Housing Agenda, I posit they aren’t, then engage industry stakeholders in cogent workable solutions.

"These armchair initiatives will burden Kenyans and worsen our situation - ultimately," Okowa Nashon, Director at Beacon Africa Limited, claimed.

The Affordable Housing Programme in Kenya is a significant step towards addressing the housing deficit in the country, which is estimated at over 2 million units.

By providing affordable housing options to low and middle-income earners, the government aims to improve the living standards of its citizens, reduce poverty, and stimulate economic growth in the housing sector.

The contributions are then used to finance the construction of affordable housing units and to provide mortgage financing to eligible Kenyans.

After seven years of contribution, employees will access the money to purchase a home at a place of their choice within the country. Further, contributors can apply for a mortgage through the Housing Fund, which provides financing of up to Ksh4 million to be repaid over up to 25 years.

The Bondeni Affordable Housing Project in Nakuru County on Monday February 13, 2023
The Bondeni Affordable Housing Project in Nakuru County on Monday, February 13, 2023
PCS

By pooling resources from employers and employees, the government aims to increase the supply of affordable housing units and promote homeownership among low and middle-income earners.

Presently, Finance Bill proposed the deletion of a section of the Miscellaneous Fees and Levies Act, 2016 (MFLA) that provided for a reduced Import declaration (IDF) rate of 1.5 per cent on raw materials and intermediate products imported by manufacturers upon recommendation to the Commissioner by the Cabinet Secretary responsible for matters relating to industry,

The Miscellaneous Fees and Levies Act, 2016 also provided removal of taxes on inputs for the construction of houses under an affordable housing scheme upon recommendation to the Commissioner by the Cabinet Secretary responsible for matters relating to housing.

The Finance Bill 2023 seeks a complete deletion of the Miscellaneous Fees and Levies Act, 2016 (MFLA) to impose taxes on the goods imported for Affordable Housing Programme.

"Manufacturers and players in the construction of affordable housing will have to incur additional importation costs with IDF applying at the proposed rate of 2.5 per cent.

"We note that this move seems to contradict the Government’s agenda of supporting the construction and building material value chain. We also expect that manufacturers will pass on the additional cost to consumers," PricewaterhouseCoopers (PWC) Kenya observed. 

Treasury CS Njuguna Ndung'u during a meeting with UN officials at his office on February 24, 2023.
Treasury CS Njuguna Ndung'u during a meeting with UN officials at his office on February 24, 2023.
Photo
The National Treasury