Housing Principal Secretary Charles Hinga, on Thursday, May 18, explained that Kenyans would still be required to take mortgages for houses built under the Housing Fund despite the 3 per cent deductions.
Speaking during an interview on Spice FM, the PS explained that the monthly contribution of the 3 per cent was savings that the government would use as capital to buy houses from investors.
Hinga added that most Kenyans would contribute Ksh84,000 for seven years, with the government estimating to collect Ksh9 billion monthly for the fund.
After the government buys the houses from investors, the CS indicated that contributors will then enter a mortgage agreement with the government with options for monthly rent.
"After the investor builds the house, I buy it from them, then I can give it to the Kenyan at the interest rate of 5 per cent.
"Once you enter that house, we will enter a contract with you. If you were paying a rent of Ksh5,000, you enter into this scheme where you pay the same amount for 30 years and the house becomes yours," he stated.
The PS maintained that the scheme was beneficial given that Kenyans would normally not home homes despite paying their landlords rent for the same period.
On the other hand, he noted that the monthly contributions would enable the government to undertake affordable housing projects nationwide.
He allayed fears that the houses would be expensive even as he underlined that the government would give investors land for free.
Hinga asserted that the move would reduce the cost of building the houses - a move that will significantly reduce the prices of the houses.
"Essentially what we are doing is telling the investor to build these houses at a certain amount which we believe Kenyans can afford. Govt will provide land at no cost. Then we will cap the selling price," he stated.
Housing Fund
The Housing Fund was included in the Finance Bill 2023 with proposals for employed Kenyans to pay 3 per cent of their salary monthly. Employers are also expected to match the employee's contributions.
According to PS Hinga, the highest contributions will be capped at Ksh2,500.
Under the Fund, contributors can get a refund of their contributions after seven years if they are not interested in taking up the houses.
Notably, employees and employers have opposed the proposed deductions, with many proposing for the scheme to be voluntary.
The Finance Bill 2023 is yet to be passed by Parliament. The opposition leaders, however, warned that they would oppose the bill.
