This archive report was first published on 6 May 2020.
Kenya's pension schemes control Sh1.2 trillion, spread across property, cash, shares, and government bonds.
Workers could soon use up to Sh7 million or a maximum of 40 percent of their retirement savings to buy their first residential house in changes to the law aimed at boosting home ownership and lifting the sluggish property market.
Treasury Secretary Ukur Yatani has published draft regulations showing rules and limits of accessing pension savings for home purchase.
The proposed changes to the pension laws are meant to make it easier for individuals to buy their first homes, given that most households are unable to raise the minimum house purchase deposit or afford the typical monthly mortgage repayments.
According to data from the Kenya National Bureau of Statistics (KNBS), approximately 74.5 percent of the formal working population in Kenya earns Sh50,000 and below per month.
Asset manager Cytonn notes that with the average mortgage size in Kenya at Sh10.9 million, interest rates at 13.6 percent, and an average tenor of 12 years, an average Kenyan household earning Sh100,000 per month is required to part with monthly repayments of Sh153,905, which is unaffordable to this income class.
However, using 40 percent of their gross income on monthly mortgage payments under similar market conditions, the household can afford a Sh2.8 million home.
Commercial banks in Kenya had only 26,504 mortgage accounts in their books, worth Sh224.8 billion as at the end of 2018, according to Central Bank of Kenya data.
The Retirement Benefits Authority (RBA) has been critical of provisions allowing employees to raid their pension funds before reaching retirement age.
