The State Officers’ House Mortgage Scheme Fund is seeking amendments to the Public Finance Management Regulations to expand its mandate beyond the purchase of completed houses to include house improvement and the purchase of plots for future residential development.
The current regulations limit the Fund to financing only completed houses, excluding home renovations and use of gratuity -a payment, often a lump sum, given as a reward for service, typically upon retirement or resignation- for loan repayment.
In a report by the Auditor-General for the financial year 2024/25, the fund, which has been facing high default rates on mortgages to public servants, added that it is facing insufficient funds to meet increasing demand following the inclusion of additional state officers, such as military personnel.
‘The Fund has had its own fair share of challenges. The main challenge being that PFM (State Officers House Mortgage Scheme Fund) Regulations 2015 . do not cover the following main areas: purchase and improvement of house, purchase of plot for future development of a residential house, and lack of adequate funds with the inclusion of state officers such as officers serving as brigadiers and above in line and officers serving as ambassadors, high commissioners, diplomats and /or consular rep,’ the report says.
‘I am of the opinion that the regulations need to be amended to cover the above-mentioned areas so that the objectives of the Fund can be met with minimal challenges,’ said Julius Wairagu, the fund manager.
In the period under review, the fund completed 241 applications with supporting documents and recommended them to banks for mortgage processing valued Sh6.584 billion.
A total of 205 loans were fully disbursed to applicants, totaling Sh5.30 billion, while 26 applications valued Sh619 million were approved and are pending disbursement.
‘Other areas of consideration include the requirement for an unexpired lease term of at least 45 years, termination of employment or expiry of term of a state officer when the loan is being processed, applications which are for plot purchase, inadequacy of Funds, arrears by officers whose terms have expired, and utilisation of gratuity for loan repayment,’ added Mr Wairagu.
He adds that these gaps, including the lack of clear guidance on loan management when a state officer’s term expires or on using gratuity for repayment, have constrained the Fund’s ability to meet demand and serve all eligible officials effectively.
Only four percent of Kenyans can afford a Sh10 million mortgage amid rising home prices, according to a survey by Zamara, the Centre for Affordable Housing Finance in Africa, and FSD Kenya.
It shows that just 6,146 out of 145,205 pension scheme members, or 4.23 percent, can take a loan above Sh10 million.
Central Bank of Kenya data confirms the trend, with the average home loan rising from Sh6.9 million in 2013 to Sh7.5 million in 2014, and now standing at Sh9 million, driven by high property prices and upfront fees.