This archive report was first published on 1 November 2021.
Published on November 1, 2021, Kenyan banks are taking precautionary measures to mitigate risks in the real estate sector.
As part of these measures, lenders will demand additional security from borrowers when the value of the existing collateral drops below the loan amount.
According to the Kenya Bankers Association (KBA), banks will carry out frequent revaluations of charged properties to ensure that the value of the collateral covers the value of the outstanding loan by a multiple.
‘‘You need to get the valuer to revalue the collateral to ensure that you are still within the required parameters. If you find that you are below some of the requirements it will mean that you require additional collateral from the borrower just to safeguard yourself and ensure that at any point in time you have adequate cover,’’ said Habil Olaka, the KBA chief executive.
Kenyan banks are heavily exposed to the real estate sector, with over $37.1 billion worth of securities held by big banks tied in the real estate.
Analysts at EFG Hermes have warned that the bursting of a potential property bubble could have a significant impact on listed financial services companies and in particular, the banks.
However, other analysts and property consultants are of the view that the Kenyan property market is not ripe for a bubble as there is no over-supply of properties and banks have tightened their lending standards.
