# Mortgages in Kenya

An episode of [The Mwango Capital Podcast](https://invisiblenetwork.ai/podcast/1583367792), 9 Oct 2024, 1 h 15 min.

Audio: https://api.substack.com/feed/podcast/149907960/763bab10211f85e8838441e2be9b3d1a.mp3

In this episode recorded on 19.09.2024, we are joined by Geofrey Mwaura - Head of Refinancing at Kenya Mortgage Refinance Company, Lydia Owuor - Partner at Cliffe Dekker Hofmeyr, Stella Situma - Partner at Cliffe Dekker Hofmeyr, and Beatrice Chege - Head of Mortage at Absa Bank Kenya to discuss common misconceptions about mortgages in Kenya. Subscribe to get notified when we make a new post. Key Quotes “A mortgage can typically be obtained through three means, a borrower may be buying an existing house, or you may be buying off plan, or you may be in ownership of an undeveloped piece of land, and then you're borrowing to construct.” Lydia Owuor “When you look at the statistics, Kenya's mortgage penetration is less than 2%, in fact, 1.9% as per the last CBK report that was published last month. We’re actually talking about a very big gap in terms of mortgage penetration. Homeownership sits at around 21% in the country compared to other markets where they are up over 70-65% in Eastern Europe where home ownership is quite high. So we have a lot to do.” Geoffrey Mwaura “When we started, there was a limitation on income, 150, 000 which moved to 200, 000. But recently, we have removed that income limitation so that we allow more Kenyans to enjoy this program. So as of today, you can access up to 10.5 million with no income restrictions. So if you are earning through employment or you are doing business, you can still access this as long as you are buying a property that is within that 10.5 million for your own occupation.” GeoffreyMwaura “What I want to emphasize is that due diligence is key. In circumstances where you're buying, due diligence is key. Due diligence on the registered owner of the property, due diligence on the property itself, and lately the scope of due diligence has expanded. We've seen flooding incidents, and that may require structural due diligence before you acquire such properties. We've seen properties that have been adversely mentioned. We have an ongoing land conversion and migration process, which is a process of tidying up our records. And there are some properties within Nairobi because that's where we still are, which have not been gazetted for conversion. So you need to be proactive, check why your property has not been gazetted for conversion and please deal with those issues. So do not skip due diligence.” Lydia Owuor One of the things to look at when you're dealing with such developers is do they have the necessary approvals for the development that they're taking out? And this is where you actually demand to see those documents because you're buying into this and you need to know that you're buying into something that has already been legally recognized by the government. And then also do they have enough money to finish the construction? Where is their source of income? You don't want to be the ones pumping everything and you know with pre-sales the deposits don't come all at the same time. So when people are not paying what happens does the developer stall and just wait for you to pump in the money?” Beatrice Chege Show Notes 00:00:00 Introduction 00:02:49 Understanding Mortgages in Kenya 00:04:18 KMRC’s Role in Affordable Housing 00:06:29 Eligibility Criteria and Legal Aspects for Mortgages 00:18:54 Debunking Mortgage Myths 00:23:57 KMRC’s Funding and Impact 00:30:57 Down Payment, Monthly Repayments, and Foreclosure 00:45:08 Income Limits and Mortgage Accessibility 00:48:52 Credit Worthiness and Mortgage Approval Process 00:54:28 Due Diligence, Success Stories, and Market Impact 01:02:02 Mortgage Products and Closing Remarks Get full access to The Mwango Weekly at mwangocapital.substack.com/subscribe

## Transcript

[0:00] SPEAKER_01: Welcome to another edition of Mongo Spaces this lovely Thursday evening.
[0:04] SPEAKER_01: I want to welcome you to a really wonderful discussion on mortgages in Kenya.
[0:08] SPEAKER_01: With us is a very able panel.
[0:09] SPEAKER_01: My name is Eric Mokaev.
[0:11] SPEAKER_01: I'm from Mongo Capital.
[0:12] SPEAKER_01: I'm the founder.
[0:13] SPEAKER_01: We try at Mongo Spaces to make sure that you have topical discussion on great
[0:16] SPEAKER_01: topical issues that are dealing with markets and all of that and business.
[0:20] SPEAKER_01: So today our discussion is around common misconception about mortgages in Kenya.
[0:24] SPEAKER_01: And I want to start by introducing the panel first.
[0:27] SPEAKER_01: The panel can introduce themselves.
[0:29] SPEAKER_01: So I'm going to start with Geoffrey.
[0:30] SPEAKER_01: Maybe Geoffrey can introduce yourself and say what you do at KMRC.
[0:34] SPEAKER_01: And tell us a little bit about KMRC as we start off.
[0:37] SPEAKER_01: Thank you, Mukaiya.
[0:38] SPEAKER_00: And good evening, listeners.
[0:40] SPEAKER_00: My name is Geoffrey Moura.
[0:41] SPEAKER_00: I'm the head of refinancing at Kenya Mortgage Refinance Company.
[0:45] SPEAKER_00: This is a company that was established to necessarily participate in the affordable housing space to
[0:50] SPEAKER_00: offer liquidity to the market.
[0:52] SPEAKER_00: And I'll be giving you more details as we go along.
[0:55] SPEAKER_01: Thank you, Geoffrey.
[0:56] SPEAKER_01: Next is Beatrice from AMSA.
[0:57] SPEAKER_01: Maybe you can introduce yourself a little bit and what you do at AMSA Kenya.
[1:01] SPEAKER_03: Good evening.
[1:02] SPEAKER_03: So my name is Beatrice Chege.
[1:03] SPEAKER_03: I am the head of mortgage business at AMSA Kenya,
[1:06] SPEAKER_03: and I'm very happy to be in this space just to make home ownership more easy to
[1:11] SPEAKER_03: understand and to also debunk some of the myths that we have about mortgage and
[1:16] SPEAKER_03: home ownership.
[1:17] SPEAKER_03: So thank you very much.
[1:18] SPEAKER_03: I'm very excited to be here.
[1:19] SPEAKER_01: We're really happy to have you here.
[1:21] SPEAKER_01: And now we move to Lydia and Sterling.
[1:24] SPEAKER_01: So perhaps I'll start with Lydia.
[1:25] SPEAKER_01: You can introduce yourself and tell us about where you work at and what you do.
[1:29] SPEAKER_01: Thank you so much, Eric.
[1:30] SPEAKER_02: As you've heard, I'm Lydia Orr.
[1:32] SPEAKER_02: I'm a partner at CDH.
[1:33] SPEAKER_02: Stands for Kisbeka Hofmeyer.
[1:36] SPEAKER_02: I'm a law firm with a regional affiliation operating under a unified brand known as
[1:40] SPEAKER_02: CDH and KT Law elects the Nairobi office.
[1:43] SPEAKER_02: So in terms of what I do,
[1:45] SPEAKER_02: I am specialized in real estate and securities documentation and at the firm I had
[1:49] SPEAKER_02: the real estate practice in the Nairobi office.
[1:52] SPEAKER_02: About myself,
[1:52] SPEAKER_02: I also have a passion in simplifying legal issues for clients and potential clients
[1:57] SPEAKER_02: through writing.
[1:58] SPEAKER_02: So you may have seen some of my articles.
[2:00] SPEAKER_02: And let me just say that I'm sure I may have assisted some of you here,
[2:03] SPEAKER_02: given that I have been in practice for over 10 years.
[2:06] SPEAKER_02: And also when it comes to the misconceptions, I have to confess that I could be one of the accused.
[2:11] SPEAKER_02: So I'm hoping to debunk some of the misconceptions that we have in the industry.
[2:16] SPEAKER_02: Thank you so much for having me.
[2:17] SPEAKER_02: Stella, over to you.
[2:18] SPEAKER_03: Thank you.
[2:18] SPEAKER_03: My name is Skyla Sikoma.
[2:20] SPEAKER_03: I'm a partner in the finance and banking department at CIGI NHKC Law NLP.
[2:25] SPEAKER_03: I've been handling security protection,
[2:28] SPEAKER_03: basically preparation and protection of mortgages,
[2:30] SPEAKER_03: commonly known as chargers in Kenya,
[2:32] SPEAKER_03: over 10 years.
[2:33] SPEAKER_03: And I'm also here to defend some of the myths or misconceptions surrounding mortgages.
[2:39] SPEAKER_01: We'll dive right into some of the key questions.
[2:41] SPEAKER_01: If you have any questions, after the half hour mark, I'll be taking some questions from the audience.
[2:46] SPEAKER_01: But for the first 30 minutes, I'll just deal with the speakers that we have here.
[2:50] SPEAKER_01: Now I'll start with Geoffrey.
[2:51] SPEAKER_01: Perhaps Geoffrey, you can just give a light introduction to what a mortgage is and what that refers to.
[2:56] SPEAKER_01: So perhaps a definition of terms for someone who might be new to the world of mortgages.
[3:01] SPEAKER_00: Thank you, Eric.
[3:02] SPEAKER_00: When you look at mortgage,
[3:03] SPEAKER_00: in essence,
[3:04] SPEAKER_00: mortgage is a facility that you take to buy an asset that is a house,
[3:10] SPEAKER_00: that is land and building,
[3:11] SPEAKER_00: that then you use that asset as a collateral to acquire a facility.
[3:16] SPEAKER_00: go to a financial institution,
[3:18] SPEAKER_00: this is a bank or a SACO or any other financial institution like a microfinance bank,
[3:22] SPEAKER_00: where they will offer you a facility to purchase or take some equity release from
[3:26] SPEAKER_00: that unit.
[3:27] SPEAKER_00: And they will use that unit as a security for the loan.
[3:30] SPEAKER_00: And therefore, they are going to create a charge.
[3:32] SPEAKER_00: And this charge is the interest that then the institution that is giving you money
[3:36] SPEAKER_00: will then create some interest in that facility to show that they have lent you and
[3:40] SPEAKER_00: therefore they have an interest in that collateral.
[3:43] SPEAKER_00: And then you'll pay over a long term.
[3:45] SPEAKER_00: And of course, you'll pay both interest and principal over time.
[3:48] SPEAKER_00: And once you complete payment, then the facility is discharged to you.
[3:53] SPEAKER_00: In terms of ownership, the property remains under you as the owner of the property, as a borrower.
[3:58] SPEAKER_00: So you hold a title on that.
[4:00] SPEAKER_00: But the institution just creates an interest.
[4:02] SPEAKER_00: And that is what then they call a charge.
[4:04] SPEAKER_00: So once you pay, they discharge.
[4:06] SPEAKER_00: And therefore, you can then use the property to do other things here.
[4:09] SPEAKER_00: either sell or continue enjoying your property so that is a setup when it comes to
[4:14] SPEAKER_00: mortgage in this market and just to put it further to then how does kmrc come into
[4:20] SPEAKER_00: that equation is that we do what we call mortgage refinance then we play in the
[4:24] SPEAKER_00: secondary market by playing the secondary market means that we don't deal directly
[4:28] SPEAKER_00: with the retail customers so what we do is that we lend money to financial
[4:32] SPEAKER_00: institutions
[4:33] SPEAKER_00: These are regulated financial institutions,
[4:35] SPEAKER_00: either banks or SACOs,
[4:37] SPEAKER_00: to enable them to own land to retail customers.
[4:40] SPEAKER_00: So we are the intermediaries between you as a borrower and the financial institutions.
[4:45] SPEAKER_00: So we offer the financial institutions affordable liquidity to be able to
[4:50] SPEAKER_00: facilitate affordable housing in this market.
[4:53] SPEAKER_00: Actually, that is how we participate.
[4:55] SPEAKER_00: And I'll be giving more details as we go along.
[4:57] SPEAKER_01: A quick one.
[4:58] SPEAKER_01: You had refinancing.
[4:59] SPEAKER_01: What does refinancing mean?
[5:01] SPEAKER_00: Just to go a bit back is that in 2017, 2018, the government of Kenya saw a need in the market.
[5:08] SPEAKER_00: And this was with partnership with the World Bank and African Development Bank.
[5:12] SPEAKER_00: They saw a need in Kenya.
[5:13] SPEAKER_00: What was happening is that mortgage financing in this market was both inaccessible and unaffordable.
[5:19] SPEAKER_00: So those are the two challenges that the Kenyan consumers were facing.
[5:23] SPEAKER_00: And therefore,
[5:23] SPEAKER_00: the government established Kenya Mortgage Refinance Company so that it can
[5:28] SPEAKER_00: facilitate affordable home loans in Kenya.
[5:31] SPEAKER_00: So what we do as Kenya Mortgage Refinance Company,
[5:34] SPEAKER_00: we offer funding to financial institutions,
[5:37] SPEAKER_00: that is banks and SACOs.
[5:39] SPEAKER_00: under the Affordable Housing Programme,
[5:41] SPEAKER_00: so that this institution can be able to offer this funding to Kenyans who would
[5:45] SPEAKER_00: want to purchase or build their homes.
[5:48] SPEAKER_00: And by definition,
[5:49] SPEAKER_00: when you look at refinancing,
[5:51] SPEAKER_00: it means that you have already been offered a loan by your primary mortgage lender,
[5:56] SPEAKER_00: that is the bank or the SACO,
[5:57] SPEAKER_00: and then that bank or SACO approaches KMRC
[6:01] SPEAKER_00: to refinance that mortgage,
[6:03] SPEAKER_00: offer them the same funds of what they have already given you as a customer so that
[6:07] SPEAKER_00: they can go and create more loans in the market.
[6:10] SPEAKER_00: So what the primary mortgage lender is doing then is actually accessing affordable
[6:14] SPEAKER_00: housing funds from a Kenya mortgage refinance company so that they are able to
[6:18] SPEAKER_00: on-lend that to consumers in the market to enable Kenyans access affordable home loans.
[6:24] SPEAKER_00: So that's how the refinance works in this market.
[6:26] SPEAKER_01: I'll come back to you, Geoffrey, but now let me switch to Beatrice a little bit.
[6:29] SPEAKER_01: Beatrice, you've been in the market quite a bit.
[6:31] SPEAKER_01: Maybe you could give a bit of a flavor on how the mortgage market looks like in
[6:35] SPEAKER_01: Kenya and perhaps what do people need as eligibility criteria to get a mortgage?
[6:39] SPEAKER_03: One of the things about the perceptions about mortgage is that home ownership is
[6:43] SPEAKER_03: very difficult or it's very expensive.
[6:45] SPEAKER_03: So there was a time when home ownership was actually for the rich and the elite.
[6:48] SPEAKER_03: And this was because developers then would build only high-end properties and
[6:53] SPEAKER_03: They were making good margins out of that.
[6:55] SPEAKER_03: So this has since changed with the advent of affordable housing because the
[6:58] SPEAKER_03: government has also really demonstrated that developments can be delivered at lower
[7:04] SPEAKER_03: developmental costs and they will still be able to make profits.
[7:07] SPEAKER_03: Also,
[7:08] SPEAKER_03: Geoffrey has mentioned Care Mercy has really played a very big role in making
[7:12] SPEAKER_03: homeownership possible because now the middle income and the low income earners
[7:17] SPEAKER_03: have been introduced to a single-digit mortgage.
[7:19] SPEAKER_03: So if then you could not afford a mortgage of 5 million at the market rate of,
[7:24] SPEAKER_03: say,
[7:24] SPEAKER_03: 18% and above,
[7:26] SPEAKER_03: now with an interest rate of 9%,
[7:28] SPEAKER_03: it's actually possible and very achievable.
[7:30] SPEAKER_03: And with flexible loan repayment periods of up to 25 years,
[7:35] SPEAKER_03: it makes also your mortgage repayment very flexible and very manageable.
[7:40] SPEAKER_03: So now on ability and some of the eligibility criteria,
[7:43] SPEAKER_03: with now the discounted interest rates,
[7:45] SPEAKER_03: your home journey now starts to look more secure.
[7:48] SPEAKER_03: And we look at your source of income because this is what the bank will really look
[7:52] SPEAKER_03: at to determine how much you can actually get.
[7:55] SPEAKER_03: So for some customers,
[7:56] SPEAKER_03: we look at their payslips and you're able to commit up to at least 65% of your net
[8:02] SPEAKER_03: income towards paying the mortgage.
[8:05] SPEAKER_03: And we also assume at this point that you're taking up to 65%,
[8:09] SPEAKER_03: you also don't have other loan commitments.
[8:12] SPEAKER_03: So for business people,
[8:13] SPEAKER_03: because they also enjoy the benefits of mortgage,
[8:16] SPEAKER_03: we look at their turnovers of the business and we also take up at least 15% of this
[8:22] SPEAKER_03: turnover for their consideration as being profit.
[8:26] SPEAKER_03: Then from that profit amount, then we are able to determine what the loan amount would look like.
[8:31] SPEAKER_03: So we finance both the salaried customer with a payslip and also for business
[8:35] SPEAKER_03: people who are actually using their cash flows,
[8:38] SPEAKER_03: their business cash flows to finance their mortgage journey.
[8:41] SPEAKER_03: So this is how we primarily determine what the affordability criteria is for a mortgage customer.
[8:46] SPEAKER_03: I think the other very most important critical aspects of the journey is the
[8:50] SPEAKER_03: property that the customer is actually buying.
[8:53] SPEAKER_03: Because mortgages are known to own a house or a property,
[8:56] SPEAKER_03: The property is definitely now a very critical aspect of the mortgage journey.
[9:01] SPEAKER_03: And if you're purchasing the house,
[9:02] SPEAKER_03: the valuation report will normally give us a sense of what is the reference of the property,
[9:08] SPEAKER_03: what is the value,
[9:09] SPEAKER_03: because you also don't want to overpay for a property that is not worth
[9:13] SPEAKER_03: the value.
[9:14] SPEAKER_03: We also look at what's the ownership at that point,
[9:17] SPEAKER_03: who actually owns the property,
[9:18] SPEAKER_03: where is the location.
[9:19] SPEAKER_03: We also look at the building materials that have been used to build the property
[9:22] SPEAKER_03: because mortgage is a long-term facility.
[9:25] SPEAKER_03: So you want to be sure that this property can actually weather the tenure of the mortgage.
[9:30] SPEAKER_03: So this is what determines whether the property is good for lending.
[9:34] SPEAKER_03: So the value of the property then determines the eligibility criteria.
[9:38] SPEAKER_03: So from a mortgage perspective, I think those are the most critical aspects of eligibility.
[9:43] SPEAKER_03: We look at your income, very important.
[9:46] SPEAKER_03: And then we look at what does that property look like?
[9:48] SPEAKER_03: And is it worth the value that today we're giving you the loan for?
[9:52] SPEAKER_01: Question to you, Beatrice.
[9:54] SPEAKER_01: Now,
[9:54] SPEAKER_01: is it that you start with finding the property and then coming to you or should I
[9:59] SPEAKER_01: start with you first without the assessment and then go search for the property?
[10:03] SPEAKER_03: I always advise that the first step of a mortgage is to have a discussion with your
[10:08] SPEAKER_03: bank because then you're able to have an idea of what your income already qualifies
[10:12] SPEAKER_03: you for before you actually go and look for the property.
[10:15] SPEAKER_03: So that if you know you can qualify for a 5 million property,
[10:19] SPEAKER_03: it will also save you the time of going,
[10:21] SPEAKER_03: searching,
[10:22] SPEAKER_03: getting a property,
[10:23] SPEAKER_03: and then coming back and realizing you cannot afford the property.
[10:26] SPEAKER_03: So it's always good first just to do a pre-analysis,
[10:29] SPEAKER_03: understand what are you able to qualify for,
[10:31] SPEAKER_03: and then that will give you an idea of where to even start looking for the property.
[10:36] SPEAKER_03: So it's good first income analysis,
[10:38] SPEAKER_03: then you go look for the property,
[10:40] SPEAKER_03: then now you come back to the bank weekly.
[10:42] SPEAKER_03: the full list of requirements,
[10:43] SPEAKER_03: which I'm sure we're going to engage with in this session so that we are able now
[10:47] SPEAKER_03: to continue with the mortgage journey.
[10:49] SPEAKER_01: I'll come back to you again, Beatrice.
[10:51] SPEAKER_01: Olivia and Stella now,
[10:53] SPEAKER_01: I wanted to switch to you,
[10:54] SPEAKER_01: maybe perhaps the legal process in terms of getting a mortgage.
[10:57] SPEAKER_01: It's the legal bit that sometimes defeats Kenyans because they're worried the
[11:02] SPEAKER_01: property that they may go into,
[11:04] SPEAKER_01: they've seen some being demolished and all that.
[11:07] SPEAKER_01: How do you safeguard yourself in the legal sense when you're doing mortgages and
[11:11] SPEAKER_01: purchasing houses in Kenya?
[11:13] SPEAKER_01: So either of you can start and the other can continue.
[11:15] SPEAKER_01: Thank you so much, Eric.
[11:17] SPEAKER_02: And let me first say that there's a widespread belief that the process is cumbersome,
[11:22] SPEAKER_02: which I will assist in debunking.
[11:24] SPEAKER_02: But also because I'm a legal mind,
[11:26] SPEAKER_02: I have to begin by clarifying,
[11:28] SPEAKER_02: and I know there are some advocates in the audience,
[11:31] SPEAKER_02: that when we are referring to a mortgage,
[11:33] SPEAKER_02: we are not talking about the legal instrument or the document securing the property
[11:38] SPEAKER_02: because we had an amendment in our laws where we expunged the legal instrument
[11:42] SPEAKER_02: known as a mortgage and the differentiator between a mortgage and a charge.
[11:46] SPEAKER_02: Historically,
[11:47] SPEAKER_02: what a mortgage would imply would be a transfer to the lender and a charge would
[11:51] SPEAKER_02: just be a security.
[11:53] SPEAKER_02: So we expunged the legal instruments known as mortgages.
[11:56] SPEAKER_02: So if you hear me talking about a charge, that is the instrument.
[12:00] SPEAKER_02: But I do acknowledge that the term mortgage applies broadly also in relation to the
[12:04] SPEAKER_02: process of borrowing against property.
[12:06] SPEAKER_02: So having cleared that, I also want to say that this is one of the most common misconceptions here.
[12:12] SPEAKER_02: There's a misconception that the mortgage process,
[12:15] SPEAKER_02: including dealings with lenders and legal requirements,
[12:23] SPEAKER_02: And also because of this, many tend to feel that this leads to inflated costs.
[12:28] SPEAKER_02: But I just want to say that as much as these processes involve multiple steps,
[12:32] SPEAKER_02: they are designed to prevent issues such as fraud,
[12:36] SPEAKER_02: right?
[12:36] SPEAKER_02: They're also designed to ensure compliance with regulation,
[12:39] SPEAKER_02: obviously to uphold the integrity of the banking system.
[12:43] SPEAKER_02: because banks or lenders have to ensure that depositors' funds are managed prudently.
[12:48] SPEAKER_02: These processes also are meant to ensure fairness and protection of the rights of both parties involved.
[12:53] SPEAKER_02: The processes are also aimed to mitigate risk,
[12:56] SPEAKER_02: and this is very important,
[12:58] SPEAKER_02: especially for the lenders,
[12:59] SPEAKER_02: because the property needs to be valued correctly.
[13:02] SPEAKER_02: That's one, and I think Beatrice alluded to that.
[13:04] SPEAKER_02: The property has to be clean and clear of any legal issues,
[13:08] SPEAKER_02: so it has to be clean from a legal lens,
[13:09] SPEAKER_02: and then the property also has to be properly registered.
[13:12] SPEAKER_02: for the property to form good security and generally to reduce exposure,
[13:17] SPEAKER_02: especially to the lenders,
[13:18] SPEAKER_02: so that it doesn't expose lenders to potential losses.
[13:21] SPEAKER_02: So as you can see, there's benefits to all the parties involved.
[13:25] SPEAKER_02: And then I also want to say that a mortgage can typically be obtained through, let me say, three means.
[13:31] SPEAKER_02: A borrower may be buying an existing house,
[13:33] SPEAKER_02: or you may be buying off-plan,
[13:35] SPEAKER_02: or you may be in ownership of an undeveloped piece of land,
[13:38] SPEAKER_02: and then you're borrowing to construct.
[13:40] SPEAKER_02: So those are certain elements that we need to look at.
[13:42] SPEAKER_02: In terms of the stages and the steps,
[13:45] SPEAKER_02: just given that summary that I've given,
[13:47] SPEAKER_02: it depends on those three categories that I've mentioned.
[13:50] SPEAKER_02: But also keep in mind that legal is coming in after the internal processes by the
[13:54] SPEAKER_02: lender have been finalized.
[13:56] SPEAKER_02: And then we are then instructed to perfect the security created by the borrower over that property.
[14:02] SPEAKER_02: So there are many processes involved, including due diligence, which I've spoken about mitigating risk.
[14:08] SPEAKER_02: And I will unpack what due diligence means,
[14:11] SPEAKER_02: depending again on which category,
[14:13] SPEAKER_02: because as I said,
[14:14] SPEAKER_02: you may be in ownership of an undeveloped piece of land,
[14:16] SPEAKER_02: or you may be buying an existing house.
[14:18] SPEAKER_02: Depending on that piece of property,
[14:20] SPEAKER_02: we may be involved even in circumstances where you're still at the offer stage.
[14:24] SPEAKER_02: And then we can assist you with the sale agreements.
[14:27] SPEAKER_02: There's also now, again, the loan documentation process.
[14:30] SPEAKER_02: And then there may be an element of transfer of property.
[14:34] SPEAKER_02: And then there may be an element of registration.
[14:36] SPEAKER_02: But I want to speak on due diligence because that's where many of the
[14:40] SPEAKER_02: misconceptions that we encounter happen.
[14:43] SPEAKER_02: There are...
[14:44] SPEAKER_02: I want to just give a summary.
[14:46] SPEAKER_02: Critical legal checks that I must highlight because they mainly occur during the due diligence stage.
[14:52] SPEAKER_02: And one of the checks is in relation to the remainder of the lease term.
[14:56] SPEAKER_02: If the subject property is a leasehold property,
[14:59] SPEAKER_02: typically lenders prefer properties that have sufficient remaining period in terms
[15:05] SPEAKER_02: of the lease term.
[15:06] SPEAKER_02: So typically, if you have a lease term that is below 20 years, it may not be attractive to the lenders.
[15:12] SPEAKER_02: And if you're not aware of this,
[15:14] SPEAKER_02: then you may feel that you have been inconvenienced in the process of acquiring the loan.
[15:18] SPEAKER_02: But other than that,
[15:19] SPEAKER_02: we also find borrowers who,
[15:22] SPEAKER_02: when already in ownership of undeveloped properties,
[15:24] SPEAKER_02: may be holding leasehold term,
[15:27] SPEAKER_02: but they delay extending the term when it's about to expire.
[15:30] SPEAKER_02: So by the time they come to us,
[15:32] SPEAKER_02: we have a term that requires renewal,
[15:34] SPEAKER_02: first and foremost,
[15:35] SPEAKER_02: before we take any steps.
[15:36] SPEAKER_02: And obviously that will protract the whole process.
[15:39] SPEAKER_02: And then there are also other elements of due diligence that we have to look at in
[15:42] SPEAKER_02: terms of permitted use of the property.
[15:45] SPEAKER_02: We have to check whether the property's current use complies with zoning regulations.
[15:49] SPEAKER_02: We also have to check obligations relating to the property, such as rates.
[15:53] SPEAKER_02: rent, service charge, because you could be buying an existing unit from somebody who bought before.
[15:59] SPEAKER_02: And we have to check whether there are any underlying obligations that we need to settle.
[16:03] SPEAKER_02: And then the big one for me now, because it's trending right now, is the issue of spousal consent.
[16:08] SPEAKER_02: I'm sure you may have seen articles relating to a recent court decision on this matter.
[16:14] SPEAKER_02: Under Kenyan law, spousal consent may be required when property is matrimonial.
[16:19] SPEAKER_02: I'm saying may be required because we may have partners in marriage, but who are in a prenup.
[16:23] SPEAKER_02: So it may be required in those circumstances,
[16:26] SPEAKER_02: but the substance of the judgment that I'm talking about clearly reminded us that
[16:31] SPEAKER_02: if you do not have a marriage certificate,
[16:34] SPEAKER_02: then you're in a gray area in terms of your legal status.
[16:37] SPEAKER_02: And then we also encounter situations where the property presented to us has
[16:41] SPEAKER_02: pending probate proceedings or succession issues.
[16:44] SPEAKER_02: So it means that we have to deal with that first.
[16:46] SPEAKER_02: And then we also receive sometimes properties which have existing encumbrances that
[16:50] SPEAKER_02: need to be discharged first or even subordinated.
[16:54] SPEAKER_02: And then we, again, sometimes encounter properties that have been adversely mentioned in public records.
[17:00] SPEAKER_02: And of course,
[17:00] SPEAKER_02: if a property has been adversely mentioned in a public record,
[17:03] SPEAKER_02: then we have to advise the bank or the lenders on the potential impact or the exposure.
[17:08] SPEAKER_02: Restrictions can be registered against the property.
[17:10] SPEAKER_02: If we see that, we have to deal with that.
[17:12] SPEAKER_02: Then another one that people ignore is that many times we encounter borrowers who
[17:17] SPEAKER_02: come to us when their original title has been misplaced.
[17:21] SPEAKER_02: They just can't find it.
[17:22] SPEAKER_02: All efforts to trace them have not been successful.
[17:25] SPEAKER_02: And at that point,
[17:25] SPEAKER_02: obviously,
[17:26] SPEAKER_02: we have to start from the process of getting a replacement title before we get the
[17:31] SPEAKER_02: borrower to a position where they can engage with the bank required.
[17:35] SPEAKER_02: Then sometimes we encounter boundary and subdivision issues still within the legal aspects that we check.
[17:40] SPEAKER_02: when doing our due diligence.
[17:42] SPEAKER_02: And for clients in the diaspora,
[17:44] SPEAKER_02: there's a general misconception in the country that we actually allow digital
[17:49] SPEAKER_02: signatures or electronic signatures.
[17:51] SPEAKER_02: We have a law that I think it came into force in 2020,
[17:54] SPEAKER_02: I believe,
[17:55] SPEAKER_02: but the implementation aspect of it has not been done.
[17:58] SPEAKER_02: So we are not there yet in terms of the documents that we register at these registries.
[18:03] SPEAKER_02: We still need wet ink signatures.
[18:05] SPEAKER_02: So for them, we have to deal with that.
[18:07] SPEAKER_02: We have to get the documents to them to execute before a notary public.
[18:11] SPEAKER_02: And then also for this cluster,
[18:13] SPEAKER_02: we have clients in the diaspora or borrowers in the diaspora who are comfortable in
[18:17] SPEAKER_02: the fact that they have secured the power of attorney.
[18:20] SPEAKER_02: So whenever they are engaging with lenders, they donate to engage on their behalf.
[18:25] SPEAKER_02: But when we look at these powers of attorney,
[18:27] SPEAKER_02: we find that they've not been properly registered or they've not been registered in
[18:30] SPEAKER_02: the registry where the property is registered.
[18:33] SPEAKER_02: So those things can cause delays.
[18:35] SPEAKER_02: And then obviously it's common knowledge that most of the times or many a times we
[18:38] SPEAKER_02: encounter delays at the registry.
[18:40] SPEAKER_01: I'll give you a break a little bit so that I can go to Stella slightly and then I'll come back to you.
[18:45] SPEAKER_01: Stella,
[18:46] SPEAKER_01: in terms of the mortgage process,
[18:48] SPEAKER_01: usually from the legal aspect,
[18:49] SPEAKER_01: what are some of the key things from your experience people should pay attention to
[18:53] SPEAKER_01: before I come back to Lydia?
[18:54] SPEAKER_03: Just to bring on to the points that Lydia has raised,
[18:57] SPEAKER_03: and I think it's also a myth that they need to be debunked,
[19:00] SPEAKER_03: is that here surrounding the...
[19:02] SPEAKER_03: charging of your property to a lender because the misconception that the moment I
[19:06] SPEAKER_03: charge my property,
[19:07] SPEAKER_03: one of the things I'm supposed to do is to deposit the original title.
[19:10] SPEAKER_03: Someone would feel like if the original title is in the bank,
[19:12] SPEAKER_03: it means that in the event I deposit my property,
[19:14] SPEAKER_03: the bank can automatically charge or sell my property and recover whatever is
[19:20] SPEAKER_03: to them.
[19:20] SPEAKER_03: But people need to realize that there are very stringent provisions in the law,
[19:23] SPEAKER_03: including the Constitution,
[19:25] SPEAKER_03: which protects the right to property.
[19:26] SPEAKER_03: And in that regard,
[19:27] SPEAKER_03: there are various steps that the bank needs to follow,
[19:32] SPEAKER_03: including carrying out a postal valuation,
[19:34] SPEAKER_03: giving borrowers an official notice,
[19:36] SPEAKER_03: and not just the borrowers,
[19:37] SPEAKER_03: but also spouses,
[19:39] SPEAKER_03: and get the property leased also to those who are leasing the property,
[19:43] SPEAKER_03: who understand that the bank cannot just sell the property at any price the bank
[19:47] SPEAKER_03: needs to pay.
[19:48] SPEAKER_03: There are statutory recommendations
[19:50] SPEAKER_03: You cannot sell the property at the best price that you thought you could fetch.
[19:53] SPEAKER_03: If it is below the statutory requirement of 75%,
[19:56] SPEAKER_03: that's an issue that you as a voter have the right to go to court and challenge.
[20:00] SPEAKER_03: So for me,
[20:01] SPEAKER_03: I would say those are the issues that I need to debunk so that the mortgage
[20:04] SPEAKER_03: business or charging of property can be a more acceptable or feasible option for homeownership.
[20:11] SPEAKER_01: Lydia, back to you.
[20:12] SPEAKER_01: And before I go to Geoffrey to give me a bit more content on KMRC and mortgages.
[20:17] SPEAKER_01: To our listeners,
[20:18] SPEAKER_01: once again,
[20:18] SPEAKER_01: if you have any questions to our very able panelists,
[20:21] SPEAKER_01: just make sure you DM us or just below the pinned tweet,
[20:24] SPEAKER_01: you can send in some questions.
[20:25] SPEAKER_01: Lydia,
[20:26] SPEAKER_01: back to you in terms of the legal process and some of the things that people should
[20:29] SPEAKER_01: pay attention to.
[20:30] SPEAKER_02: And I think I preach a lot that when borrowers need to ensure that they have all
[20:36] SPEAKER_02: the required documentation,
[20:37] SPEAKER_02: at least from the legal lens,
[20:39] SPEAKER_02: because we get issues around this area.
[20:41] SPEAKER_02: So as I've said,
[20:42] SPEAKER_02: things like the marriage certificates,
[20:43] SPEAKER_02: just ensure that you have everything where you need to speak to your spouse and
[20:47] SPEAKER_02: disclose the transactions that are happening and prepare them in good time about
[20:51] SPEAKER_02: the requirement for spousal consent.
[20:53] SPEAKER_02: Please do that.
[20:54] SPEAKER_02: You may want to check whether your titles are in order,
[20:56] SPEAKER_02: do you have the original title and things like that.
[20:59] SPEAKER_02: But what...
[20:59] SPEAKER_02: I absolutely preach about is that you do not underestimate the requirement to
[21:05] SPEAKER_02: engage experienced professionals early enough.
[21:08] SPEAKER_02: And experienced professionals are not just talking about a lawyer.
[21:11] SPEAKER_02: I'm not pitching for us.
[21:13] SPEAKER_02: I'm talking about valuers, surveyors, planners.
[21:16] SPEAKER_02: These people help you connect the dots.
[21:17] SPEAKER_02: These people help you see the blind spots.
[21:20] SPEAKER_02: These people help you understand the legal documentation.
[21:23] SPEAKER_02: So please don't underestimate the necessity of working with experienced professionals.
[21:28] SPEAKER_01: Lydia,
[21:28] SPEAKER_01: I think it's a good point to emphasize because Ken has always said,
[21:31] SPEAKER_01: and then in the process,
[21:32] SPEAKER_01: you end up shedding tears in the end.
[21:33] SPEAKER_01: Could you emphasize perhaps what are the costs,
[21:36] SPEAKER_01: the fees of some of these professionals vis-a-vis the value of the advice that you
[21:41] SPEAKER_01: get so that you don't end up in tears in the end?
[21:44] SPEAKER_01: Thank you.
[21:44] SPEAKER_02: Thank you, Eric.
[21:45] SPEAKER_02: And I think this is the point where I said perhaps I stand accused.
[21:49] SPEAKER_02: And I'm trying to soften my voice a bit because there's a misconception about legal charges.
[21:54] SPEAKER_02: And I think as a fraternity,
[21:56] SPEAKER_02: we need to fix it because the legal profession actually has clear guidelines.
[22:01] SPEAKER_02: in terms of how we bill.
[22:02] SPEAKER_02: We have an Advocate's Remuneration Order 2014,
[22:05] SPEAKER_02: and then it's also supported by the Principal Order of 2009.
[22:10] SPEAKER_02: And because we have this remuneration order, as I said, we do have clear guidelines.
[22:14] SPEAKER_02: And in terms of how we bill,
[22:16] SPEAKER_02: you will find that legal fees is usually calculated as a percentage of the property
[22:21] SPEAKER_02: value when you're buying,
[22:22] SPEAKER_02: or we look at the amount that is being secured,
[22:25] SPEAKER_02: and then we apply a percentage to it.
[22:28] SPEAKER_02: So there is a remuneration order
[22:31] SPEAKER_02: But then also sometimes we get clients who may not understand that over and above
[22:36] SPEAKER_02: legal fees,
[22:37] SPEAKER_02: there are additional costs.
[22:39] SPEAKER_02: And some of them are statutory charges, which are not paid to us.
[22:43] SPEAKER_02: They are paid to the various entities.
[22:45] SPEAKER_02: So there's always the stamp duty element, there's registration fees, there's valuation.
[22:50] SPEAKER_02: And these ones you can actually verify on your own just to confirm whether you're
[22:54] SPEAKER_02: being over billed and how to go about it.
[22:56] SPEAKER_02: So we do have a guideline.
[22:58] SPEAKER_02: I just needed to say that.
[22:59] SPEAKER_02: And also there are elements that sometimes are forgotten.
[23:02] SPEAKER_02: And if you're not aware,
[23:03] SPEAKER_02: people may forget because these guidelines also allow for reduced fees in certain instances,
[23:10] SPEAKER_02: because we have circumstances where an advocate is acting for both the seller and
[23:14] SPEAKER_02: the buyer.
[23:15] SPEAKER_02: I believe in that situation, the buyer gets a reduced fee.
[23:19] SPEAKER_02: by one-sixth.
[23:20] SPEAKER_02: Also, we have situations where the same advocate is acting in the transfer and the charge.
[23:25] SPEAKER_02: I believe the guidelines say that in those circumstances,
[23:27] SPEAKER_02: now for the borrowing aspect,
[23:29] SPEAKER_02: you only bail 50%.
[23:30] SPEAKER_02: I'm trying to think of the other one.
[23:32] SPEAKER_02: There's also one where the borrower pays 50% if the advocate is acting for both the
[23:37] SPEAKER_02: lender and the borrower.
[23:38] SPEAKER_02: But of course, there's always the issue of informed and independent legal advice.
[23:43] SPEAKER_02: So there are
[23:44] SPEAKER_02: situations where it may not be advisable to use the same lawyer in the same transaction,
[23:48] SPEAKER_02: but there are guidelines that allow for reduced fees in certain circumstances.
[23:53] SPEAKER_01: I'll come back to you for the legal advice once again.
[23:56] SPEAKER_01: I'll go back to Jeffrey,
[23:57] SPEAKER_01: maybe you can tell me a little bit about,
[23:59] SPEAKER_01: there are fixed rate mortgages and then there's also variable mortgages in Kenya.
[24:04] SPEAKER_01: What's the difference between these two and where does KMRC play a role in this?
[24:08] SPEAKER_01: And then in the same vein,
[24:10] SPEAKER_01: give me a bit of a flavor on what KMRC does in this role of promoting mortgage
[24:15] SPEAKER_01: affordability and access in Kenya.
[24:17] SPEAKER_01: You can give us that and then we'll go to Beatrice after you.
[24:19] SPEAKER_00: Thank you, Mukaiya.
[24:20] SPEAKER_00: Just to put it in context is that how KMRC comes in into this equation is that we
[24:25] SPEAKER_00: have a value proposition.
[24:26] SPEAKER_00: And the value proposition is that we are targeting the mid and low income earners in this market.
[24:32] SPEAKER_00: because that's where we realise that there's a very big gap,
[24:35] SPEAKER_00: both in terms of mortgage penetration,
[24:37] SPEAKER_00: because you recall,
[24:38] SPEAKER_00: even totally when you look at the statistics,
[24:41] SPEAKER_00: Kenya's mortgage penetration is about less than 2%.
[24:46] SPEAKER_00: In fact, 1.9% as per the last CDK report that was published last month.
[24:50] SPEAKER_00: We are actually talking about a very big gap in terms of mortgage penetration.
[24:54] SPEAKER_00: Home ownership,
[24:55] SPEAKER_00: we are,
[24:55] SPEAKER_00: I think,
[24:55] SPEAKER_00: sitting at around 21% in the country compared to other markets where they are up
[25:00] SPEAKER_00: over 70,
[25:01] SPEAKER_00: 65% in the Eastern Europe where home ownership is quite high.
[25:05] SPEAKER_00: So we have a lot to do.
[25:07] SPEAKER_00: When you talk about 30,000 mortgages in Kenya as per the published CBK Bank
[25:13] SPEAKER_00: Supervision Report of 2023,
[25:14] SPEAKER_00: it means that there's a lot.
[25:17] SPEAKER_00: So how does KMRC come in?
[25:18] SPEAKER_00: We have a value proposition.
[25:19] SPEAKER_00: The value proposition is that we offer financing for Kenyans who want to buy homes
[25:24] SPEAKER_00: or build their homes up to Kenya shillings 10.5 million.
[25:28] SPEAKER_00: That is the amount that we do refinance.
[25:31] SPEAKER_00: This is a long-term financing up to 25 years and it's a single digit financing.
[25:36] SPEAKER_00: So we are talking about getting an interest rate of below 10% that is fixed for the turn of the mortgage.
[25:42] SPEAKER_00: That is for the turn of the 25 years.
[25:44] SPEAKER_00: It will not vary.
[25:45] SPEAKER_00: So what that does then, it gives you better planning for your finances.
[25:50] SPEAKER_00: Because you know that one day the bank will not just wake up and say that because
[25:54] SPEAKER_00: of the economic situation in the country that we are now going to vary the rate and
[25:59] SPEAKER_00: increase the rate which will affect your repayment.
[26:01] SPEAKER_00: We also offer up to 1 or 5% of loan-to-value ratio.
[26:06] SPEAKER_00: What this does then,
[26:07] SPEAKER_00: it helps customers who ordinarily will not have either a deposit to pay or closing costs,
[26:14] SPEAKER_00: then they can be financed for that.
[26:16] SPEAKER_00: And that is actually one of the issues we talk about as an entry barrier to mortgage financing.
[26:21] SPEAKER_00: So that is actually a cost that has already been taken care of by this proposition.
[26:26] SPEAKER_00: And of course, the benefit of taking a mortgage is that you also benefit from interest relief.
[26:30] SPEAKER_00: That for the interest that you pay on monthly basis actually is a tax deductible.
[26:35] SPEAKER_00: When you are doing your taxes for your income tax,
[26:38] SPEAKER_00: you actually deduct that interest from the income that will be taxed.
[26:42] SPEAKER_00: So that gives you a relief,
[26:44] SPEAKER_00: meaning that you actually are paying less tax at the end of the day compared to
[26:49] SPEAKER_00: somebody who is just paying rent and therefore they are not getting this kind of benefit.
[26:52] SPEAKER_00: So those are some of the things that we've actually brought in this market to bring affordability.
[26:57] SPEAKER_00: The fixed-term mortgage is actually a game-changer because when you have a
[27:01] SPEAKER_00: fixed-interest mortgage in this country,
[27:03] SPEAKER_00: what it does then,
[27:05] SPEAKER_00: Kenyans are able to plan better when it comes to mortgages.
[27:08] SPEAKER_00: And what that does then is that you are able to,
[27:12] SPEAKER_00: for the tenure of the loan,
[27:13] SPEAKER_00: if you are taking a loan for 10 to 15 years,
[27:16] SPEAKER_00: that it has a fixed repayment.
[27:19] SPEAKER_00: Your income will continue improving.
[27:20] SPEAKER_00: You will have capital gains on your property, but your repayment will be standard for the 25 years.
[27:26] SPEAKER_00: And therefore, you actually get benefit out of that.
[27:29] SPEAKER_00: Single digit mortgages is actually also a game changer because when you look at,
[27:34] SPEAKER_00: for example,
[27:34] SPEAKER_00: if you're taking a one million mortgage in this market for at least 25 years,
[27:39] SPEAKER_00: you are talking about paying 9,000 Kenya shillings.
[27:43] SPEAKER_00: 9,000 is actually even less than the rent you'll be paying for that kind of a house.
[27:47] SPEAKER_00: So what that then does is that the rent you are paying today can actually be used
[27:52] SPEAKER_00: to service a mortgage with a very small adjustment.
[27:55] SPEAKER_00: So Kenya Mortgage Refinance Company then has come to this market to ensure that we
[28:00] SPEAKER_00: offer single digit mortgages.
[28:01] SPEAKER_00: And that is currently we are working with 20 institutions,
[28:03] SPEAKER_00: that is eight banks and 11 circles and one microfinance bank.
[28:07] SPEAKER_00: And these institutions are able to offer Kenyans a single digit mortgage in this market,
[28:12] SPEAKER_00: which is concessionally priced.
[28:14] SPEAKER_00: And that is KMRC funding that we've pumped into the market.
[28:17] SPEAKER_00: So far,
[28:17] SPEAKER_00: we have lent in excess of 12 billion in this market to 12 institutions that are
[28:21] SPEAKER_00: already lending these funds to Kenyans.
[28:23] SPEAKER_00: Kenyans can use that money to
[28:25] SPEAKER_00: buy a new property, just purchase a property, either a standalone or an apartment.
[28:30] SPEAKER_00: They can use the money to convert a mortgage that was created in the last two years
[28:35] SPEAKER_00: from 2021 April coming forward.
[28:37] SPEAKER_00: If you took a commercial mortgage that is commercially priced today, you can actually convert that to
[28:44] SPEAKER_00: single-digit mortgage under these 20 institutions that are offering that product.
[28:48] SPEAKER_00: If you took a personal loan in the market in the last two years and you use that
[28:53] SPEAKER_00: money to buy a home or to buy an owner-occupier property,
[28:58] SPEAKER_00: you can actually still convert that by charging that property to the institution
[29:02] SPEAKER_00: and then you get a relief.
[29:03] SPEAKER_00: because then the repayment will be less than what you are paying today in that.
[29:07] SPEAKER_00: You can buy and build,
[29:08] SPEAKER_00: you can do a construction,
[29:10] SPEAKER_00: and these loans are available to both Kenyans who are residents and Kenyans who are
[29:13] SPEAKER_00: in the diaspora market.
[29:15] SPEAKER_00: So that is how KMRC has come in to actually change the narrative on mortgage
[29:20] SPEAKER_00: financing in this market and making it very affordable.
[29:23] SPEAKER_01: So for those who don't know, where do you get your funding from?
[29:26] SPEAKER_01: Because Canadians are a bit skeptical of lower interest rates when market rates are pretty high.
[29:31] SPEAKER_01: So maybe you can tell people a little bit, what's your secret sauce there?
[29:35] SPEAKER_00: So what happens is that through the government of Kenya,
[29:38] SPEAKER_00: we have concessional funding that has been negotiated with the DFIs.
[29:42] SPEAKER_00: We're working with two DFIs, that is the World Bank and African Development Bank.
[29:47] SPEAKER_00: And through those two institutions,
[29:49] SPEAKER_00: they have extended accessional facility to Kenya Mortgage Refinance Company,
[29:53] SPEAKER_00: which is guaranteed by the government of Kenya.
[29:56] SPEAKER_00: And that is how we are able to source our funding.
[29:58] SPEAKER_00: But in addition to that funding,
[30:00] SPEAKER_00: which is concessionally priced,
[30:02] SPEAKER_00: we also did access a capital market where we raised a bond.
[30:07] SPEAKER_00: And that bond plus the concessional funding we have, we blended that funding.
[30:11] SPEAKER_00: And that's why we are able then to offer very well-priced funding to the market below 10%.
[30:17] SPEAKER_00: So we do extend funding to these institutions at below 6.6%.
[30:23] SPEAKER_00: And then they offer a small margin to cover the operational cost, but they still lend within 9.9%.
[30:31] SPEAKER_00: And that is a guaranteed offering in the market because the way we guarantee that
[30:36] SPEAKER_00: offering is actually being extended to Kenyans is that when you talk about refinancing,
[30:42] SPEAKER_00: is that by the time the primary mortgage lender is bringing those loans to KMRC for refund,
[30:47] SPEAKER_00: they have already released the fund to the market.
[30:50] SPEAKER_00: And that is how we are able to monitor that Kenyans are actually accessing and
[30:54] SPEAKER_00: benefiting from this program of affordable housing.
[30:57] SPEAKER_01: Beatrice,
[30:58] SPEAKER_01: now to you,
[30:59] SPEAKER_01: there's a question that has come in,
[31:00] SPEAKER_01: so I'll put it together with the question I had.
[31:02] SPEAKER_01: It's about the monthly payments.
[31:04] SPEAKER_01: So people seem to assume that at the beginning,
[31:06] SPEAKER_01: you're paying principal alone and then the interest comes later.
[31:10] SPEAKER_01: Or is it the other way around?
[31:12] SPEAKER_01: How does that work in terms of mortgage repayments, the monthly repayment?
[31:16] SPEAKER_01: How do you schedule them?
[31:17] SPEAKER_01: And how do you go about that?
[31:18] SPEAKER_01: And as you speak about the monthly payments, tell us a little bit about the down payments.
[31:23] SPEAKER_01: Is it true that we require really large down payments to get started in terms of getting a mortgage?
[31:29] SPEAKER_03: In terms of the monthly repayments,
[31:31] SPEAKER_03: what we do is we take the loan amount,
[31:33] SPEAKER_03: we apply the interest rate,
[31:35] SPEAKER_03: and then we extend it over a mortgage period of up to 25 years.
[31:39] SPEAKER_03: So when we do this,
[31:41] SPEAKER_03: we actually give you a standard or an equal amount of monthly repayment every month
[31:46] SPEAKER_03: for the rest of the tenure of the mortgage.
[31:49] SPEAKER_03: However,
[31:49] SPEAKER_03: the listener who has asked that question is actually right,
[31:52] SPEAKER_03: because even within that monthly repayment,
[31:55] SPEAKER_03: the bank will actually recover interest faster than it does recover the principal.
[32:01] SPEAKER_03: But that is not necessarily a bad thing because mortgage is on a reducing balance.
[32:06] SPEAKER_03: So one of the myths about mortgage is that you pay until you retire, which is actually not the case.
[32:11] SPEAKER_03: Because it's actually on reducing balance,
[32:13] SPEAKER_03: we encourage customers to increase the monthly repayment,
[32:17] SPEAKER_03: which then automatically goes to reducing your principal or you can make lump sum
[32:22] SPEAKER_03: payments
[32:23] SPEAKER_03: and reduce the principal.
[32:25] SPEAKER_03: Hence, you're paying less interest because you have paid down your principal.
[32:29] SPEAKER_03: So yes,
[32:30] SPEAKER_03: your interest repayment is higher at the beginning,
[32:33] SPEAKER_03: but then because it's on reducing balance and you're actually allowed to fast track
[32:38] SPEAKER_03: your mortgage repayment or reduce the principal by putting in lump sum payments,
[32:42] SPEAKER_03: then it works out that you actually pay far more interest to the bank.
[32:46] SPEAKER_03: So today there is a lot about debunking and demystifying all these concepts,
[32:53] SPEAKER_03: which at some point were there.
[32:55] SPEAKER_03: Previously,
[32:55] SPEAKER_03: homeowners were expected to put a lot of down payment between 10% and 30% towards a
[33:01] SPEAKER_03: deposit and a purchase of a property.
[33:03] SPEAKER_03: But now currently, clients can make a down payment of whatever amount they feel comfortable with.
[33:08] SPEAKER_03: And if they don't have that down payment, we can actually finance that down payment.
[33:13] SPEAKER_03: So in addition to the down payment,
[33:15] SPEAKER_03: which the bank can finance,
[33:17] SPEAKER_03: Joffrey has also alluded to the mortgage costs.
[33:20] SPEAKER_03: So mortgage costs are not hidden costs.
[33:22] SPEAKER_03: That was another myth that needs to be debunked.
[33:26] SPEAKER_03: There are no hidden costs in mortgage because we tell you in advance what those costs look like.
[33:32] SPEAKER_03: They are transactional costs.
[33:34] SPEAKER_03: We advise the customers from the onset on what these costs look like.
[33:37] SPEAKER_03: And Lydia has actually touched on a few.
[33:39] SPEAKER_03: So one of them is legal costs.
[33:41] SPEAKER_03: This is a legal transaction, so there has to be a payment to the lawyers.
[33:45] SPEAKER_03: There is insurance that has to be taken on the mortgage.
[33:48] SPEAKER_03: So the first one is life.
[33:49] SPEAKER_03: The customer's life has to be insured for the period of the mortgage.
[33:53] SPEAKER_03: And this is just in case of death or critical illness.
[33:56] SPEAKER_03: If a death does occur, then the insurance company will actually pay off the loan balance.
[34:02] SPEAKER_03: If the critical illness happens,
[34:04] SPEAKER_03: the insurance will pay the loan balance or a portion of the loan depending on how
[34:10] SPEAKER_03: critical the situation or the illness is.
[34:12] SPEAKER_03: So the property itself is also insured against fire,
[34:16] SPEAKER_03: quake and floods and we've seen that happen in the market recently.
[34:19] SPEAKER_03: the flooding.
[34:20] SPEAKER_03: So the insurance covers such risks of the property.
[34:22] SPEAKER_03: Then there's valuation, because we must know what does the property look like?
[34:27] SPEAKER_03: What are its values?
[34:28] SPEAKER_03: Is it good for security?
[34:29] SPEAKER_03: And that comes at a cost.
[34:31] SPEAKER_03: The biggest cost in a mortgage transaction,
[34:33] SPEAKER_03: especially when you're buying,
[34:34] SPEAKER_03: is the stamp duty,
[34:36] SPEAKER_03: which is a government tax which is levied on property transactions.
[34:39] SPEAKER_03: And this can go up to 4%.
[34:40] SPEAKER_03: There are other areas where it's 2%.
[34:43] SPEAKER_03: And for poor ownership,
[34:44] SPEAKER_03: for first-time homeownership,
[34:46] SPEAKER_03: I know there is a program for the government to reduce that significantly.
[34:49] SPEAKER_03: So if you don't have the deposit today and you don't have the closing costs,
[34:53] SPEAKER_03: we call them closing costs and not hidden costs,
[34:56] SPEAKER_03: we can actually finance 1 or 5 percent,
[34:59] SPEAKER_03: which is what Ofri has alluded to.
[35:02] SPEAKER_01: Geoffrey, someone is asking you to clarify a bit on the moving to mortgages to single digits.
[35:06] SPEAKER_01: Someone missed out on that.
[35:08] SPEAKER_01: How do you help people get single digitized?
[35:11] SPEAKER_01: They can move their mortgages to you.
[35:13] SPEAKER_00: Single digit mortgages are available in this country.
[35:15] SPEAKER_00: And this is under this program of affordable housing.
[35:19] SPEAKER_00: For Kenyans who would want to buy properties or take loans up to 10.5 million,
[35:24] SPEAKER_00: they can actually get for their own occupation.
[35:27] SPEAKER_00: Here we are talking about home ownership, not for investment.
[35:31] SPEAKER_00: That needs to be very clear that we are focused on ensuring that Kenyans can
[35:35] SPEAKER_00: actually afford their homes affordably and they're able to access funding.
[35:39] SPEAKER_00: from these institutions.
[35:40] SPEAKER_00: So what we have done, we are working with financial institutions that are regulated.
[35:44] SPEAKER_00: That's why I talked about the big banks in the country.
[35:47] SPEAKER_00: I've talked about the SACOs in the country and we actually, we are continuously expanding that offering.
[35:52] SPEAKER_00: We started with 20 financial institutions, that is eight banks, one microfinance bank and 11 SACOs.
[35:59] SPEAKER_00: We actually recently expanded that to include the other regulated banks and SACOs
[36:05] SPEAKER_00: in the market so that we can ensure that more Kenyans are able to access
[36:09] SPEAKER_00: this funding from wherever you bank, as long as you're banking with a regulated financial institution.
[36:15] SPEAKER_00: So today you can go to your bank or your SACO and actually you can first check the
[36:20] SPEAKER_00: ones that have already accessed funding and you can see that from our website.
[36:24] SPEAKER_00: You can see actually the 20 institutions that are already participating in the program.
[36:28] SPEAKER_00: You go to that institution and tell them that you want to access a KMRC funded home loan.
[36:33] SPEAKER_00: They will facilitate you to
[36:36] SPEAKER_00: on to buy or convert your existing mortgage as long as it was acquired from 2021 coming forward.
[36:44] SPEAKER_00: Because we are looking at the recently acquired homes,
[36:47] SPEAKER_00: recently acquired properties,
[36:49] SPEAKER_00: where you took a commercial loan to buy a property that you are
[36:53] SPEAKER_00: living in, that can actually be converted to a single-digit KMRC-funded home loan.
[37:00] SPEAKER_00: But these loans are acquired from the financial institutions because KMRC does not do retail lending.
[37:07] SPEAKER_00: We do whole
[37:08] SPEAKER_00: sell lending at a secondary level and we finance these financial institutions so
[37:13] SPEAKER_00: that they can be able to offer you that single-digit mortgage.
[37:16] SPEAKER_00: It is actually below 10%.
[37:18] SPEAKER_00: All the institutions are operating within a single digit.
[37:22] SPEAKER_00: They can give you up to 25 years and that interest rate will not change because it
[37:27] SPEAKER_00: has been guaranteed by Kenya Mortgage Finance Company.
[37:30] SPEAKER_00: That's how the program works.
[37:31] SPEAKER_01: I've just gone to the website, kmrc.co.ke slash PMLs, that's what you call them, right?
[37:36] SPEAKER_01: Family Mortgage Lenders.
[37:38] SPEAKER_01: Yeah, Family Mortgage Lenders, yes.
[37:40] SPEAKER_01: I've checked out.
[37:41] SPEAKER_01: And if you're listening in and you want to check out some of the partner institutions, please go there.
[37:46] SPEAKER_01: Once again, it's kmrc.co.ke slash PMLs.
[37:49] SPEAKER_00: And Eric, we also offer advisory to Kenyans who maybe you don't know where to start.
[37:54] SPEAKER_00: You can always call KMRC.
[37:56] SPEAKER_00: We have our numbers on the website and we'll advise you.
[37:59] SPEAKER_00: We'll actually direct you and we'll check where your bank or the financial
[38:03] SPEAKER_00: institution you're working with is a part of it.
[38:05] SPEAKER_00: If it is not part of it,
[38:06] SPEAKER_00: we'll give you advice on how then to access this funding from the other financial institutions.
[38:11] SPEAKER_00: So we'll walk with you the journey.
[38:13] SPEAKER_00: And in case you have any challenges within the journey, we will actually assist you.
[38:17] SPEAKER_00: We'll give you contacts of the primary mortgage lenders where you can actually go
[38:20] SPEAKER_00: and get more information.
[38:21] SPEAKER_00: And from time to time,
[38:23] SPEAKER_00: we actually do even webinars where we participate with these financial institutions
[38:27] SPEAKER_00: to educate Kenyans on how they can actually,
[38:29] SPEAKER_00: and this is one of the programs we are doing today,
[38:31] SPEAKER_00: just to bring this information to Kenyans.
[38:33] SPEAKER_00: So that when you go to these financial institutions,
[38:35] SPEAKER_00: you already know that the cheap funding,
[38:37] SPEAKER_00: this affordable funding in the market,
[38:39] SPEAKER_00: for you to access so that you don't end up taking a very expensive home loan in the
[38:44] SPEAKER_00: market when KMRC funding is available for you Kenyans.
[38:49] SPEAKER_01: I'll come back to Stella now and Lydia on the legal side.
[38:53] SPEAKER_01: There are things that I may have missed out in terms of asking you and in the
[38:56] SPEAKER_01: process as you answer that,
[38:57] SPEAKER_01: you could talk about foreclosure.
[39:00] SPEAKER_01: It's quite a bit of a major concern for many Kenyans.
[39:03] SPEAKER_01: It's plain dark on foreclosure and any other misconceptions,
[39:06] SPEAKER_01: especially in the legal space that you would want to debunk today.
[39:09] SPEAKER_03: I'll take the question on foreclosure.
[39:11] SPEAKER_03: So basically,
[39:12] SPEAKER_03: foreclosure refers to the legal steps that a bank takes in the event a default has
[39:16] SPEAKER_03: occurred so that the bank would either sell the property or take possession of the
[39:20] SPEAKER_03: property to realize the money that has been defaulted.
[39:23] SPEAKER_03: And at this point, I would like to point out that before the bank thinks of foreclosure,
[39:28] SPEAKER_03: Out of practice, what we've seen is that the bank uses foreclosure as a last resort.
[39:32] SPEAKER_03: Because at the end of the day, we are all human beings and we try to be as humane as possible.
[39:36] SPEAKER_03: In this exercise, it's someone's home.
[39:38] SPEAKER_03: You're making someone homeless.
[39:39] SPEAKER_03: You're disinheriting them ultimately.
[39:41] SPEAKER_03: So the law provides for three things.
[39:43] SPEAKER_03: required notices before the bank actually now sends off the property and the first
[39:48] SPEAKER_03: notice is when you have defaulted so the bank would monitor your situation and the
[39:52] SPEAKER_03: default should go on for a month or more and they'll give you a notice and in that
[39:55] SPEAKER_03: notice they'll tell you we know you've defaulted in repaying your installment
[39:58] SPEAKER_03: please raise the position within the next three months
[40:01] SPEAKER_03: And they even tell you the remedies that the bank would seek to exercise in the
[40:04] SPEAKER_03: event you fail to do that.
[40:06] SPEAKER_03: So as the time lapses,
[40:07] SPEAKER_03: most borrowers would sit back or panic,
[40:09] SPEAKER_03: get into panic mode where you're like,
[40:11] SPEAKER_03: now I've been served with a notice my property has gone.
[40:13] SPEAKER_03: No, that is not the point.
[40:14] SPEAKER_03: The moment you get that notice,
[40:15] SPEAKER_03: you walk straight to your bank or the lender and you ask them whether it's possible
[40:20] SPEAKER_03: to sit down and discuss or negotiate the facility or restructure and maybe have
[40:25] SPEAKER_03: several repayment terms just to make sure that you're within your repayment requirements.
[40:30] SPEAKER_03: So that's the first notice that the bank will issue.
[40:32] SPEAKER_03: So if you fail to take that step of walking to the bank or failing to rectify their default,
[40:38] SPEAKER_03: the bank will now give you another notice.
[40:41] SPEAKER_03: And this is a notice that the bank is saying, if you fail to repay, now we are going...
[40:45] SPEAKER_03: to the market it's called a notice of intention to sell where the bank is telling
[40:50] SPEAKER_03: you if 40 days lapse from now we will now complete a contract and completing a
[40:54] SPEAKER_03: contract is say if the bank decides to exercise statutory power of sale and now
[40:57] SPEAKER_03: have an auctioneer advertise the property for sale
[41:00] SPEAKER_03: And even the auctioneer is required to give you a redemption notice of 45 days telling you to redeem.
[41:06] SPEAKER_03: And in this redemption, the auctioneer will be telling you, please repay.
[41:10] SPEAKER_03: This is what is outstanding.
[41:12] SPEAKER_03: Please repay this failing which we shall have no option but to proceed with this auction.
[41:17] SPEAKER_03: And then again,
[41:17] SPEAKER_03: even when the auctioneer intends to proceed with the auction on that auction date,
[41:21] SPEAKER_03: a forced sale valuation must have been done to establish what value it is.
[41:25] SPEAKER_03: You cannot just come up with a figure,
[41:27] SPEAKER_03: pluck a figure and say,
[41:28] SPEAKER_03: in my view,
[41:29] SPEAKER_03: this property could fetch 5 million or 10 million.
[41:31] SPEAKER_03: No.
[41:31] SPEAKER_03: You as a borrower has the right,
[41:33] SPEAKER_03: if such a thing ever occurs,
[41:35] SPEAKER_03: to go to court and point out to the court and seek relief and tell the court,
[41:38] SPEAKER_03: I've done my own valuation and in my assessment,
[41:41] SPEAKER_03: this property,
[41:41] SPEAKER_03: in as much as the auctioneer stroke the bank wants to sell it at 5 million,
[41:45] SPEAKER_03: the value is 7 million.
[41:46] SPEAKER_03: And the Land Act puts a very strict requirement on the bank.
[41:50] SPEAKER_03: The bank now has the honors to prove that they were not in breach of that duty,
[41:55] SPEAKER_03: that they tried to scout for the best market price.
[41:58] SPEAKER_03: You'd see instances where a bank can reauction property even three times.
[42:03] SPEAKER_03: And still,
[42:03] SPEAKER_03: even if you go back to cut the quarter break,
[42:05] SPEAKER_03: no,
[42:06] SPEAKER_03: that is not the best market value that property can fetch.
[42:09] SPEAKER_03: We will not allow this sale.
[42:10] SPEAKER_03: And again,
[42:11] SPEAKER_03: even when you've been served with that notice,
[42:13] SPEAKER_03: you're allowed to go to court and ask the court to give you relief pending the
[42:17] SPEAKER_03: exercise by the bank of that right.
[42:19] SPEAKER_03: And the land act also clarifies that should you go to court,
[42:22] SPEAKER_03: it does not mean that it's an admission on your part that you are indebted to the bank,
[42:26] SPEAKER_03: you are in default of your obligations or the notice that the bank was required to
[42:31] SPEAKER_03: issue you was properly served.
[42:33] SPEAKER_03: You have the right to challenge all those things.
[42:36] SPEAKER_03: And also,
[42:36] SPEAKER_03: as I pointed out previously,
[42:38] SPEAKER_03: if you're a spouse,
[42:39] SPEAKER_03: you have the right to seek relief and say,
[42:41] SPEAKER_03: I was not informed.
[42:42] SPEAKER_03: I was not served with a notice.
[42:44] SPEAKER_03: If you're a tenant on the property,
[42:45] SPEAKER_03: you just have come to learn that this property is in the process of being auctioned.
[42:49] SPEAKER_03: You have the right to move the court and seek relief.
[42:51] SPEAKER_03: So it's not an automatic right that just because a default has occurred,
[42:55] SPEAKER_03: the bank will proceed to automatically sell your land.
[42:58] SPEAKER_03: They have to comply with statute.
[42:59] SPEAKER_03: And we've seen the courts are really,
[43:01] SPEAKER_03: really hammering the banks when this happens,
[43:04] SPEAKER_03: especially when they sell property beneath the reserve price.
[43:07] SPEAKER_03: Eric,
[43:08] SPEAKER_03: if you allow me,
[43:09] SPEAKER_02: please,
[43:09] SPEAKER_02: I want to also emphasize,
[43:10] SPEAKER_02: and Stella has quite eloquently elaborated that,
[43:14] SPEAKER_02: but I wanted to emphasize because this is one of the biggest misconceptions.
[43:18] SPEAKER_02: And I think it really broke my heart in 2013.
[43:20] SPEAKER_02: I believe that was the season when the market really misbehaved.
[43:23] SPEAKER_02: And if I recall correctly, I saw the interest rate jump from, I believe it was around 13% to
[43:30] SPEAKER_02: 26% and there are so many defaults.
[43:32] SPEAKER_02: My reconnection may not be so clear, but I remember that the interest rates almost doubled.
[43:37] SPEAKER_02: So we received so many instructions from borrowers in relation to this.
[43:41] SPEAKER_02: But what really concerned us was that most of the borrowers are coming to us towards the tail end.
[43:47] SPEAKER_02: because of this misconception that they feel that they cannot speak to the lender
[43:52] SPEAKER_02: once they receive this notice.
[43:53] SPEAKER_02: From what we have seen,
[43:55] SPEAKER_02: many lenders prefer to work with borrowers to find alternative repayment plans
[43:59] SPEAKER_02: rather than go through the lengthy and expensive process of foreclosure.
[44:03] SPEAKER_02: So please,
[44:04] SPEAKER_02: if you are a borrower here,
[44:05] SPEAKER_02: don't think that you're not allowed to meet your lender and discuss on alternative plans.
[44:10] SPEAKER_02: Please do so and at the earliest opportunity.
[44:13] SPEAKER_01: I think the key takeaway is that there are options when you are caught up in a
[44:17] SPEAKER_01: state where there is a foreclosure happening.
[44:19] SPEAKER_01: I think that's very important for anyone in the mortgage space should be aware of.
[44:23] SPEAKER_01: Geoffrey, you had something you wanted to clarify.
[44:26] SPEAKER_00: Actually, yes.
[44:27] SPEAKER_00: On that, Stella and Lida have actually put it very amply.
[44:31] SPEAKER_00: The customer still has the right to actually source for a buyer and sell at the best price they can.
[44:37] SPEAKER_00: And that is one option that banks always offer as a first option so that customers
[44:42] SPEAKER_00: should not feel that they are on the receiving end because there is always an
[44:45] SPEAKER_00: option for you to go and approach even relative to buy off the debt,
[44:50] SPEAKER_00: pay off the balance of the debt,
[44:51] SPEAKER_00: and then you can be left sorting out internal issues within families.
[44:55] SPEAKER_00: And I've seen that happening a lot.
[44:56] SPEAKER_00: So it is not an end that this is a closed issue that there are no other options.
[45:01] SPEAKER_00: You can actually source for a buyer and pay off the debt.
[45:05] SPEAKER_00: So that is an option that customers are always given by the bank.
[45:08] SPEAKER_01: Thank you, Geoffrey.
[45:09] SPEAKER_01: There was a point which someone wanted you to actually emphasize on the income
[45:12] SPEAKER_01: limits for borrowers when it comes to KMRC.
[45:15] SPEAKER_01: You can emphasize that point before I switch to Beatrice on something similar.
[45:19] SPEAKER_00: So over time, what we have done is that we've been very sensitive to the market changes.
[45:23] SPEAKER_00: When we started, there was a limitation on income of 150,000, which moved to 200,000.
[45:28] SPEAKER_00: But recently,
[45:29] SPEAKER_00: we have actually removed that income limitation so that we allow more Konyans to
[45:33] SPEAKER_00: enjoy this program.
[45:35] SPEAKER_00: So as of today, you can access up to 10.5 million with no income restrictions.
[45:41] SPEAKER_00: So if you are earning through employment or you are doing business,
[45:45] SPEAKER_00: you can still access this as long as you are buying a property that is within that
[45:51] SPEAKER_00: 10.5 million for your own occupation.
[45:54] SPEAKER_00: So here we are insisting that we are looking at home ownership and not for investment.
[45:58] SPEAKER_00: You are eligible to access the funding.
[46:01] SPEAKER_01: Beatrice, back to you.
[46:02] SPEAKER_01: There's a question here from someone called The Wise Shilling.
[46:05] SPEAKER_01: When you talked about the kind of people that you lend to,
[46:09] SPEAKER_01: you talked about salaried and formal business people.
[46:11] SPEAKER_01: He's asking if an informal guy can get a mortgage.
[46:15] SPEAKER_01: Are you exploring options for guys like YouTubers,
[46:17] SPEAKER_01: freelancers and those kind of stuff to tackle the issue of low mortgage penetration
[46:21] SPEAKER_01: in Kenya?
[46:22] SPEAKER_03: Yes, thanks, Eric, for that question.
[46:24] SPEAKER_03: This is a conversation that has been happening for,
[46:27] SPEAKER_03: I think,
[46:28] SPEAKER_03: quite a number of times because we see that these people have income.
[46:32] SPEAKER_03: It just doesn't look the way we want it to look.
[46:34] SPEAKER_03: It's not your typical monthly repayment or your monthly salary.
[46:38] SPEAKER_03: It's not your typical business income where you can look at turnovers.
[46:42] SPEAKER_03: But the income is actually there.
[46:44] SPEAKER_03: So for such customers, we look at the trends.
[46:47] SPEAKER_03: We look at how does your cash flow come through.
[46:50] SPEAKER_03: And we are actually able to match your cash flow the way it comes in with a monthly
[46:56] SPEAKER_03: repayment to match that income.
[46:58] SPEAKER_03: Yes, we actually do finance the obvious ones.
[47:01] SPEAKER_03: The obvious ones where we can actually see and verify that kind of income.
[47:05] SPEAKER_03: And we are very open to just explore further that space because there's a lot of
[47:10] SPEAKER_03: our customers that sit in that category
[47:13] SPEAKER_03: And indeed, they do actually have income and they can actually qualify for.
[47:17] SPEAKER_03: It's just understanding how does their income come?
[47:21] SPEAKER_03: Where do they get their income from?
[47:23] SPEAKER_03: Is it sustainable over the long period of a mortgage?
[47:26] SPEAKER_03: Because the informal income,
[47:28] SPEAKER_03: it's really about sustainability for mortgage because it's 10 years,
[47:32] SPEAKER_03: it's 15 years,
[47:33] SPEAKER_03: it's 20 years.
[47:34] SPEAKER_03: Is that YouTube income going to be available for that length of time?
[47:40] SPEAKER_03: And if not,
[47:41] SPEAKER_03: are there other possibilities of alternative incomes that then can come in and just
[47:45] SPEAKER_03: complement that kind of income?
[47:48] SPEAKER_03: Yes,
[47:48] SPEAKER_03: it is possible if we can just understand what that business looks like,
[47:52] SPEAKER_03: what are the cycle of income,
[47:55] SPEAKER_03: and then we can also match it to a lower payback.
[47:59] SPEAKER_00: Kemasi is also very active on that space.
[48:02] SPEAKER_00: And what we are actually currently in the pilot stage,
[48:05] SPEAKER_00: we are working on a mortgage guarantee program,
[48:08] SPEAKER_00: which is at conception stage,
[48:10] SPEAKER_00: because we realize that is a challenge for a certain group of customers,
[48:14] SPEAKER_00: especially who are in that space of self-employed and maybe they don't have regular income.
[48:21] SPEAKER_00: There's a bit of challenge in ascertaining the frequency and that.
[48:26] SPEAKER_00: So what we are doing is actually we are currently working on a product which is
[48:29] SPEAKER_00: called a risk sharing facility.
[48:31] SPEAKER_00: It is at conception stage.
[48:33] SPEAKER_00: And in a few months,
[48:34] SPEAKER_00: we'll actually bring it to the market,
[48:35] SPEAKER_00: which will give a partial guarantee to the lender so that they are able to lend to
[48:40] SPEAKER_00: these kind of customers who currently are being perceived to be risky.
[48:44] SPEAKER_00: And that will actually change how these customers are accessing funding in the Kenyan space.
[48:50] SPEAKER_01: Bitches, maybe back to you again.
[48:51] SPEAKER_01: How do you assess credit worthiness beyond some of the things that you've talked about for a borrower?
[48:56] SPEAKER_01: And then what exactly are some of the things that you're looking for before you
[49:00] SPEAKER_01: lend to someone from a bank perspective?
[49:02] SPEAKER_03: So one of the things we look at is your risk profile.
[49:05] SPEAKER_03: That's very important because then we're able to price your risk.
[49:10] SPEAKER_03: We look at your CRB report and it gives us a history of your borrowing and it gives
[49:14] SPEAKER_03: you a credit score,
[49:15] SPEAKER_03: which then it's easy for us to tell what kind of pricing should we give you because
[49:20] SPEAKER_03: of your risk profiling.
[49:21] SPEAKER_03: So the credit score just helps us to look at your debt history,
[49:25] SPEAKER_03: your trend,
[49:26] SPEAKER_03: and a low credit score can be for very many different reasons.
[49:29] SPEAKER_03: And one of them is just a bounce check in your account can cause your credit rating to be affected.
[49:35] SPEAKER_03: Late loan repayment areas on any other facilities that you may have.
[49:40] SPEAKER_03: A non-performing facility for various reasons.
[49:43] SPEAKER_03: And in this day and age, a lot of borrowing from the mobile company.
[49:47] SPEAKER_03: It does not mean that you will not borrow.
[49:50] SPEAKER_03: It just means that your risk profile is slightly higher.
[49:53] SPEAKER_03: So then we price that risk based on that.
[49:56] SPEAKER_03: So all these factors are considered when we price your loan and your credit worthiness.
[50:01] SPEAKER_03: And we call this actually risk-based pricing, which most of the banks have gone to.
[50:05] SPEAKER_03: So the more higher the risk you are in terms of how you behave in terms of your loans,
[50:11] SPEAKER_03: then the higher interest rate we charge for you.
[50:14] SPEAKER_03: Then, of course, you may ask, what about those people who have never borrowed?
[50:17] SPEAKER_03: Then they don't have a credit history.
[50:19] SPEAKER_03: which is true.
[50:20] SPEAKER_03: They don't have a credit history or there are some with very limited history of borrowing.
[50:24] SPEAKER_03: These customers, we will still lend to them.
[50:26] SPEAKER_03: It's only that the interest rates also,
[50:29] SPEAKER_03: the margin will be a bit higher and it also helps them now to build their credit
[50:33] SPEAKER_03: score for now future borrowings with any financial institution.
[50:37] SPEAKER_03: So creditworthiness is really important.
[50:40] SPEAKER_03: Then in terms of what else do we look for,
[50:42] SPEAKER_03: this would really come out when we walk through the mortgage journey with you.
[50:46] SPEAKER_03: Because one of the things that you need to do,
[50:48] SPEAKER_03: like I've mentioned,
[50:49] SPEAKER_03: is first understand how much money are you qualifying for your pre-analysis so that
[50:53] SPEAKER_03: you're able to go out and look for the property.
[50:55] SPEAKER_03: Once you know this amount, this will help you to know
[50:58] SPEAKER_03: what property you're looking for.
[51:00] SPEAKER_03: And the bank will finance the property anywhere in the country,
[51:04] SPEAKER_03: as long as the location is within the municipality.
[51:07] SPEAKER_03: So there are people who will tell you today, I don't want to build in Nairobi.
[51:11] SPEAKER_03: I don't want to buy in Nairobi.
[51:12] SPEAKER_03: It's okay.
[51:12] SPEAKER_03: You can actually build outside.
[51:14] SPEAKER_03: of Nairobi, and we're able to finance that.
[51:16] SPEAKER_03: Once you identify the property, the seller will give you a sale agreement or an offer of sale.
[51:21] SPEAKER_03: And together with the normal loan requirements,
[51:24] SPEAKER_03: like your payslip,
[51:25] SPEAKER_03: if your salary,
[51:25] SPEAKER_03: your bank statements,
[51:27] SPEAKER_03: your CRB report,
[51:28] SPEAKER_03: just to look at your trends of borrowing,
[51:30] SPEAKER_03: then you submit all these documents for approval to the bank,
[51:33] SPEAKER_03: and we're able to provide you with an approval.
[51:36] SPEAKER_03: Once your loan is approved, the following steps are very critical.
[51:39] SPEAKER_03: We issue you with an offer letter,
[51:41] SPEAKER_03: which you accept,
[51:42] SPEAKER_03: and then a valuation is done so that we determine also the worthiness of that
[51:47] SPEAKER_03: credit we're giving you on the property that you buy.
[51:50] SPEAKER_03: So this,
[51:50] SPEAKER_03: together with all other legal documents,
[51:52] SPEAKER_03: which I think have been mentioned by Lydia,
[51:55] SPEAKER_03: we share these documents to the lawyers.
[51:57] SPEAKER_03: And then they start that process of conveyancing.
[51:59] SPEAKER_03: That is where the property is transferred into the customer's name.
[52:03] SPEAKER_03: And then the bank takes a legal charge against the property.
[52:07] SPEAKER_03: So once this process is concluded,
[52:08] SPEAKER_03: we relate the money to actually the seller and the customer starts to pay for the
[52:13] SPEAKER_03: mortgage over the period.
[52:14] SPEAKER_03: If you're not buying a property you want to construct,
[52:17] SPEAKER_03: you either have a plot and you actually want to go through the construction process,
[52:20] SPEAKER_03: then we require you to put in a few more documents for approval.
[52:25] SPEAKER_03: You will need an approval, building approval for the property that you want to construct.
[52:30] SPEAKER_03: You will also need a bills of quantity.
[52:32] SPEAKER_03: And this bills of quantity helps you and the bank to know what will it actually
[52:37] SPEAKER_03: cost you to put up that property.
[52:39] SPEAKER_03: And like Lydia has mentioned,
[52:41] SPEAKER_03: we cannot emphasize the use of professionals even in this construction process.
[52:46] SPEAKER_03: One time I went for an engagement and somebody said something that Kenyan customers
[52:51] SPEAKER_03: actually say they are the BQ.
[52:52] SPEAKER_03: When you ask them, can you provide a BQ, they say me BQ.
[52:55] SPEAKER_03: Because they're used to doing the constructions by themselves.
[52:58] SPEAKER_03: But it's very critical because you're taking a mortgage for a long period of time.
[53:02] SPEAKER_03: So you need to know that by the time you finish to pay your mortgage after 25 years
[53:07] SPEAKER_03: or 20 years,
[53:07] SPEAKER_03: you have a solid property that can take you for years and years and even your
[53:12] SPEAKER_03: children can inherit.
[53:13] SPEAKER_03: So once we do this,
[53:14] SPEAKER_03: we take the land as the security for the bank,
[53:18] SPEAKER_03: and then we release the construction amounts in tranches,
[53:21] SPEAKER_03: and we move along with you all through the construction process.
[53:25] SPEAKER_03: And I would like to just emphasize that when you're doing a construction,
[53:28] SPEAKER_03: the end goal for the bank is that you finish the construction,
[53:32] SPEAKER_03: you move into the house,
[53:33] SPEAKER_03: and you enjoy your property.
[53:36] SPEAKER_03: You'll find a couple of people who start to build either with short-term facilities and they get stuck.
[53:41] SPEAKER_03: So you're stuck repaying a loan, you're still paying rent, and you have an incomplete property.
[53:47] SPEAKER_03: So you're basically paying tax twice.
[53:49] SPEAKER_03: You're paying rent, you're paying interest, and you still don't have a completed security.
[53:54] SPEAKER_03: So for all intentions,
[53:55] SPEAKER_03: when the bank is giving you money for construction,
[53:58] SPEAKER_03: we want you to literally enter the house and enjoy the mortgage until you finish
[54:03] SPEAKER_03: paying for it and you're a 100% owner of your property.
[54:07] SPEAKER_03: And once you understand this process and the steps through the journey,
[54:11] SPEAKER_03: then home ownership can actually be a very enjoyable journey.
[54:14] SPEAKER_03: Thank you.
[54:15] SPEAKER_01: Back to Lydia and Stella,
[54:17] SPEAKER_01: any thoughts on maybe some more things that Kenyans should be paying attention to
[54:21] SPEAKER_01: in the legal process that we may have missed out before I come to Geoffrey and
[54:25] SPEAKER_01: Beatrice for my final question before I open to the audience?
[54:28] SPEAKER_01: Lydia.
[54:28] SPEAKER_02: Stella,
[54:29] SPEAKER_02: you can chime in,
[54:30] SPEAKER_02: but I wanted to speak on,
[54:32] SPEAKER_02: so you remember I said there are categories where the borrower is buying an
[54:37] SPEAKER_02: existing unit.
[54:38] SPEAKER_02: where they're buying off plan,
[54:40] SPEAKER_02: which has its own nuances,
[54:42] SPEAKER_02: and then where the borrower already has land and they are borrowing to construct.
[54:46] SPEAKER_02: So what I want to emphasize is that due diligence is key, right?
[54:51] SPEAKER_02: In circumstances where you're buying, due diligence is key.
[54:54] SPEAKER_02: Due diligence on the registered owner of the property,
[54:56] SPEAKER_02: due diligence on the property itself,
[54:58] SPEAKER_02: and lately the scope of due diligence has expanded.
[55:01] SPEAKER_02: We've seen flooding incidents and
[55:04] SPEAKER_02: That may require structural due diligence before you acquire such properties.
[55:09] SPEAKER_02: We've seen properties which have been adversely mentioned.
[55:12] SPEAKER_02: We have an ongoing land conversion and migration process,
[55:16] SPEAKER_02: which is,
[55:17] SPEAKER_02: to put it lightly,
[55:18] SPEAKER_02: a process of tidying up our records.
[55:20] SPEAKER_02: And there are some properties within Nairobi,
[55:22] SPEAKER_02: because that's where we still are,
[55:23] SPEAKER_02: which have not been gazetted for conversion.
[55:25] SPEAKER_02: So you need to be proactive.
[55:27] SPEAKER_02: Check why your property has not been gazetted for conversion and please deal with those issues.
[55:32] SPEAKER_02: So do not skip due diligence.
[55:34] SPEAKER_02: And if it is recommended to you that we may have to expand the scope beyond the
[55:39] SPEAKER_02: usual statutes that we obtain from the registry,
[55:42] SPEAKER_02: please try and listen to the rationale,
[55:45] SPEAKER_02: what reasoning is being provided for this so that you're able to measure your risk
[55:49] SPEAKER_02: and mitigate where required.
[55:51] SPEAKER_02: So that's what I really need to emphasize.
[55:53] SPEAKER_02: And it expands to situations where we've seen lately in the news about people
[55:59] SPEAKER_02: buying off-plan developments and then midway the developer borrows and then they default.
[56:06] SPEAKER_02: The lender is seeking to realize security and then the rest of you who are buying are disregarded.
[56:11] SPEAKER_02: There are all those elements.
[56:12] SPEAKER_02: I emphasize again,
[56:13] SPEAKER_02: as Beatrice has said,
[56:14] SPEAKER_02: speak to professionals and do not disregard the requirement for due diligence on property.
[56:18] SPEAKER_02: But maybe Stella, you may have something else to share.
[56:20] SPEAKER_03: I'll also build on the due diligence.
[56:22] SPEAKER_03: I noticed that also the structure of due diligence is becoming a big thing.
[56:26] SPEAKER_03: I've handled two transactions where the bank and the customer are in a tussle, a completed unit.
[56:33] SPEAKER_03: So they were buying it from a developer who had completed construction, I think, two years ago.
[56:37] SPEAKER_03: But because of the flooding, the unit cannot be occupied.
[56:40] SPEAKER_03: So the bank and the...
[56:41] SPEAKER_03: borrower and they're both fighting the borrower says they cannot allow you to
[56:44] SPEAKER_03: release the financed portion of the purchase price the bank is saying we are
[56:47] SPEAKER_03: breaching the terms of our undertaking so it's a catch-22 we are really waiting to
[56:51] SPEAKER_03: see how that will pan out then the other thing is always consult your spouse if
[56:56] SPEAKER_03: you're married i've had transactions fall through at the last stage of security
[57:00] SPEAKER_03: perfection actually it's like their marriage is almost coming to an end because she
[57:04] SPEAKER_03: did not disclose to the husband that she was in the process of purchasing the
[57:07] SPEAKER_03: house,
[57:07] SPEAKER_03: the only time she disclosed that back was when I asked her to ensure that the
[57:11] SPEAKER_03: spouse signs the affidavit of consent on the charge.
[57:14] SPEAKER_03: Get back to me, she told me the transaction has fallen through.
[57:16] SPEAKER_03: Marriage has also fallen through.
[57:18] SPEAKER_03: That's it.
[57:18] SPEAKER_01: It seems we need to have you two on a conversation on legal loopholes and all those
[57:24] SPEAKER_01: things that people need to take care of when purchasing properties,
[57:27] SPEAKER_01: especially the off-prime thing.
[57:28] SPEAKER_01: A couple of questions I've seen people being banked in the process.
[57:31] SPEAKER_01: I think they need to be more aware of some of the risks and the things they can do in that process.
[57:35] SPEAKER_01: Geoffrey, you've been in the market for a while.
[57:37] SPEAKER_01: What are some of the success stories that you've seen in this space with KMRC?
[57:40] SPEAKER_01: And then Beatrice will come to you to share a little bit on what are some of the
[57:44] SPEAKER_01: products ABSA offers to clients out there that they can be able to take advantage of?
[57:49] SPEAKER_01: So Geoffrey, first, for you, any success stories that you've seen?
[57:52] SPEAKER_01: And then you can tell us a bit more on how you work with the primary mortgage lenders.
[57:57] SPEAKER_01: A bit emphasize that little bit so that people can remember that.
[58:00] SPEAKER_01: Thank you, Enrique.
[58:01] SPEAKER_00: KMRC has been in the market for the last, call it, four and a half years.
[58:04] SPEAKER_00: And we've actually achieved quite a milestone because in the recent past,
[58:09] SPEAKER_00: since we started lending in 2021,
[58:11] SPEAKER_00: because that is the first lending we did,
[58:14] SPEAKER_00: we've actually released over 12 billion Kenya shillings to the market.
[58:18] SPEAKER_00: that is refinancing over 3,500 mortgages.
[58:22] SPEAKER_00: So we are actually talking about over 3,500 households who are already enjoying a
[58:28] SPEAKER_00: single-digit home loan in the market.
[58:30] SPEAKER_00: That is a game changer because previously you realized that all mortgages,
[58:34] SPEAKER_00: apart from the ones that were being sponsored by employers,
[58:37] SPEAKER_00: They were all variable mortgages,
[58:39] SPEAKER_00: meaning that interest rates will vary depending with the economic situations.
[58:43] SPEAKER_00: If like now, recently you've seen the interest rates have moved from a low of 14% to 21, 22%.
[58:48] SPEAKER_00: Most of the financial institutions now are charging in excess of 20%.
[58:54] SPEAKER_00: So what does that do to a homeowner?
[58:57] SPEAKER_00: It actually puts you in a very precarious position because your income does not
[59:01] SPEAKER_00: shift with the changes in the market.
[59:03] SPEAKER_00: So that actually puts you in a default path.
[59:05] SPEAKER_00: But when it comes to the refinanced mortgages through Kenya Mortgage Refinance Company,
[59:10] SPEAKER_00: it's a fixed rate.
[59:11] SPEAKER_00: So whether the market changes
[59:13] SPEAKER_00: Your repayment will not be changed.
[59:15] SPEAKER_00: It will remain the same.
[59:17] SPEAKER_00: And the only thing you can do is to accelerate your servicing of the loan and pay
[59:21] SPEAKER_00: early and therefore enjoy your property in full.
[59:23] SPEAKER_00: We actually come to the market to disrupt the market.
[59:25] SPEAKER_00: We have brought in more players in the market.
[59:28] SPEAKER_00: Previously, circles were not doing mortgage lending.
[59:30] SPEAKER_00: Today,
[59:31] SPEAKER_00: I can confidently say that we have new players in the market who are actually
[59:35] SPEAKER_00: giving the banks competition.
[59:36] SPEAKER_00: And this is actually changing the narrative on mortgage and that we can actually
[59:41] SPEAKER_00: make it work for this country.
[59:42] SPEAKER_00: Single digit, fixed rate, long term.
[59:44] SPEAKER_00: So we are actually playing on the demand side.
[59:47] SPEAKER_00: We are insuring.
[59:48] SPEAKER_00: And the other thing we've also seen as a direction of what we are doing in the market,
[59:52] SPEAKER_00: even the property developers have actually started following that because where
[59:56] SPEAKER_00: there's demand,
[59:57] SPEAKER_00: supply follows.
[59:58] SPEAKER_00: Today, developers are actually even asking us,
[1:00:01] SPEAKER_00: What is your next move?
[1:00:02] SPEAKER_00: And with that,
[1:00:03] SPEAKER_00: then you'll find that there are more and more properties that are coming within the
[1:00:08] SPEAKER_00: 10 million and below,
[1:00:09] SPEAKER_00: which was not there before.
[1:00:11] SPEAKER_00: Previously,
[1:00:11] SPEAKER_00: developers were actually playing in the app market and that app market was actually
[1:00:15] SPEAKER_00: flooded with options.
[1:00:17] SPEAKER_00: But the lower market, 10 million and below, did not have takers.
[1:00:21] SPEAKER_00: So we've seen developers actually pushing that.
[1:00:23] SPEAKER_00: And also developers are spreading out of Nairobi to the counties.
[1:00:27] SPEAKER_00: And this is because of the funding that KMRC is offering both to the banks and SACOs.
[1:00:32] SPEAKER_00: Some of the SACOs are actually operating in Masinani.
[1:00:34] SPEAKER_00: So that tells you that when you go to Kericho, you'll find a SACO there that is offering you a mortgage.
[1:00:40] SPEAKER_00: When you go to Kilifi, you'll find a SACO that is giving you a mortgage that is KMRC funded.
[1:00:44] SPEAKER_00: And that is actually changing the landscape of mortgage finance in this market.
[1:00:49] SPEAKER_00: So the way we work with the financial institutions is that we work closely to
[1:00:52] SPEAKER_00: ensure that we are shaping the market.
[1:00:54] SPEAKER_00: So we do a lot of capacity building for these financial institutions so that the
[1:00:58] SPEAKER_00: offering they are giving to the market is actually responding to the needs of Kenyans.
[1:01:03] SPEAKER_00: And that is why in the last one year,
[1:01:06] SPEAKER_00: we have done a lot of product variation to be able to respond to the changes that
[1:01:10] SPEAKER_00: are happening.
[1:01:11] SPEAKER_00: When we started at a financing of maximum of 4 million,
[1:01:14] SPEAKER_00: That has now moved to 10.5 million to respond to the changes in the market in terms
[1:01:18] SPEAKER_00: of the property prices,
[1:01:20] SPEAKER_00: to respond to more Kenyans demanding this program.
[1:01:23] SPEAKER_00: And therefore,
[1:01:23] SPEAKER_00: we are responding to Kenyans as we go along to the point that we have now even
[1:01:27] SPEAKER_00: allowed them to convert some of the loans they took using commercial loans to buy properties.
[1:01:32] SPEAKER_00: We have now allowed them to convert that and actually to give them belief on repayment.
[1:01:37] SPEAKER_00: So Eric, this is a game changer in the market.
[1:01:39] SPEAKER_00: And we ask Kenyans to demand
[1:01:41] SPEAKER_00: for this product when they go to their financial institutions because funding is available affordably.
[1:01:46] SPEAKER_01: I should say I'm very surprised that more people don't know about this.
[1:01:50] SPEAKER_01: I think it's time to create more awareness and maybe this kind of future spaces help out on that.
[1:01:54] SPEAKER_01: Beatrice,
[1:01:55] SPEAKER_01: any advice you have for people seeking to take up mortgages and what are some of
[1:01:58] SPEAKER_01: the products that APSA Kenya offers for primary mortgage lender in Kenya?
[1:02:02] SPEAKER_03: Some of the products we're offering currently at APSA is with
[1:02:05] SPEAKER_03: You mentioned a few already.
[1:02:07] SPEAKER_03: You can actually take a mortgage to buy a property that is completed.
[1:02:10] SPEAKER_03: So you're just getting in for a transfer transaction and then homeownership.
[1:02:14] SPEAKER_03: The second one we have is construction.
[1:02:16] SPEAKER_03: You have a land.
[1:02:18] SPEAKER_03: We can actually finance you 100% of the cost of construction so that we make sure
[1:02:23] SPEAKER_03: that you don't struggle to find a deposit so that you can start the construction.
[1:02:28] SPEAKER_03: And that is why I emphasize on professionals because if we're going to finance you
[1:02:32] SPEAKER_03: 100% on the cost of construction...
[1:02:34] SPEAKER_03: There's definitely a risk that you might put the money somewhere else and not on the project.
[1:02:39] SPEAKER_03: But because there's a professional who has also indicated that the money will also
[1:02:43] SPEAKER_03: be enough to finish the construction,
[1:02:45] SPEAKER_03: then we're able and happy to give 100% just to ensure that homeownership is increasing.
[1:02:50] SPEAKER_03: If you don't have a plot yet, we can actually finance you to buy the plot and to build together.
[1:02:55] SPEAKER_03: So we call that buy and build.
[1:02:57] SPEAKER_03: And then also for those customers who probably have already bought their houses
[1:03:01] SPEAKER_03: some time back,
[1:03:02] SPEAKER_03: but they would like to release some cash out of their properties.
[1:03:06] SPEAKER_03: We call that product equity release.
[1:03:08] SPEAKER_03: And what that equity release does is that it
[1:03:10] SPEAKER_03: enables you to do other investments.
[1:03:12] SPEAKER_03: You can actually buy another land,
[1:03:14] SPEAKER_03: you can construct commercial,
[1:03:16] SPEAKER_03: you can go into investments of bonds and the money market.
[1:03:20] SPEAKER_03: So it just allows you to have a cash flow so that you're able to do other things
[1:03:24] SPEAKER_03: because you owned your property some time back.
[1:03:26] SPEAKER_03: We also have remortgage, which Geoffrey has really passionately spoken about.
[1:03:31] SPEAKER_03: So today,
[1:03:31] SPEAKER_03: if you have a mortgage at very high interest rates within the period that he has mentioned,
[1:03:36] SPEAKER_03: you can actually come to APSA and we're going to remortgage your facility into a
[1:03:41] SPEAKER_03: NOAA interest rate mortgage.
[1:03:43] SPEAKER_03: And as Geoffrey has said, you demand from your bank this product, but with APSA, don't demand, just come.
[1:03:49] SPEAKER_03: And if your bank does not give it to you, we shall give it to you.
[1:03:52] SPEAKER_03: Then we also have Lariba.
[1:03:54] SPEAKER_03: Lariba is a Sharia compliant mortgage and it's also very applicable also to KMRC.
[1:03:59] SPEAKER_03: We have a very specific Lariba product, which is Sharia compliant for KMRC.
[1:04:04] SPEAKER_03: And we are also financing the diaspora.
[1:04:07] SPEAKER_03: The thing about the diaspora is that because they're not here and they don't live in their homes.
[1:04:10] SPEAKER_03: homes, there's a slight aspect of they don't have an emotional attachment to the property.
[1:04:15] SPEAKER_03: So for them, we only require that they put in slightly more deposit into purchasing the property.
[1:04:20] SPEAKER_03: And then we also reduce the loan tenure.
[1:04:23] SPEAKER_03: We don't go up to the 25 years because they also have ability to pay a bit faster.
[1:04:29] SPEAKER_03: Then we are also financing off-plan mortgages.
[1:04:31] SPEAKER_03: I think
[1:04:32] SPEAKER_03: Stella and Lydia have really talked about off-plan because there are dangers in there.
[1:04:36] SPEAKER_03: If you deal with a developer who you've not done your due diligence on,
[1:04:40] SPEAKER_03: the likelihood of losing money is very high.
[1:04:43] SPEAKER_03: But the attraction and the beauty for off-plan sales is because by the time the
[1:04:48] SPEAKER_03: developer is reaching a very small percentage of the construction,
[1:04:52] SPEAKER_03: the value of the property appreciates so much faster.
[1:04:57] SPEAKER_03: So you find that by the time you've
[1:04:59] SPEAKER_03: finished construction from an off-plan development,
[1:05:02] SPEAKER_03: whatever the loan amount you had originally taken seems so little compared to the
[1:05:07] SPEAKER_03: outcome of the value at the time the developer is finishing construction.
[1:05:11] SPEAKER_03: So that is very attractive because the capital appreciation,
[1:05:14] SPEAKER_03: even just within the construction period,
[1:05:17] SPEAKER_03: is very high.
[1:05:18] SPEAKER_03: But the rider here is always you must do due diligence on the developer.
[1:05:23] SPEAKER_03: And one of the things to look at when you're dealing with such developers is do
[1:05:27] SPEAKER_03: they have the necessary approvals for the development that they're taking out?
[1:05:30] SPEAKER_03: And this is where you actually demand to see those documents because you're buying
[1:05:35] SPEAKER_03: into this and you need to know that you're buying into something that has already
[1:05:38] SPEAKER_03: been legally recognized by the government.
[1:05:42] SPEAKER_03: And then also, do they have enough money to finish the construction?
[1:05:45] SPEAKER_03: Where is their source of income?
[1:05:47] SPEAKER_03: You don't want to be the ones pumping literally everything.
[1:05:51] SPEAKER_03: And you know, with pre-sales also, the deposits don't come all at the same time.
[1:05:54] SPEAKER_03: So when people are not paying, what happens?
[1:05:57] SPEAKER_03: The developers stall and just wait for you to pump in the money.
[1:06:00] SPEAKER_03: And many times you've even borrowed through other facilities to give to the developer for your off-plan.
[1:06:07] SPEAKER_03: purchase.
[1:06:07] SPEAKER_03: So you're still paying interest here and the developer is waiting for people to pay
[1:06:12] SPEAKER_03: in so that he can finish the construction.
[1:06:14] SPEAKER_03: And then another thing that you want to look at is the track record of the developer.
[1:06:18] SPEAKER_03: Is he a one hit wonder?
[1:06:20] SPEAKER_03: Is this a dream that he was hoping to achieve with one development?
[1:06:24] SPEAKER_03: You want to make sure that this developer has actually been in this business.
[1:06:27] SPEAKER_03: He knows what he's doing and you can go and verify on the ground which developments
[1:06:32] SPEAKER_03: he has executed and successfully completed.
[1:06:35] SPEAKER_03: So we are financing off-plan developers at APSA,
[1:06:39] SPEAKER_03: but for us,
[1:06:39] SPEAKER_03: we really have to do a serious due diligence before we can engage on the off-plan mortgages.
[1:06:47] SPEAKER_03: Then for other products,
[1:06:48] SPEAKER_03: which are not mortgage related,
[1:06:49] SPEAKER_03: but really coming together with mortgage,
[1:06:51] SPEAKER_03: is that we have a very vibrant bank assurance product proposition with very
[1:06:56] SPEAKER_03: competitive endowment plan.
[1:06:58] SPEAKER_03: And one of the most popular products is actually the last expense.
[1:07:01] SPEAKER_03: And then from a banking perspective, we have
[1:07:04] SPEAKER_03: Fantastic SME loan propositions for the SME and savings products.
[1:07:08] SPEAKER_03: Eric, just as I finalize, I'd like to just talk about the auction process because it can be a pain point.
[1:07:14] SPEAKER_03: But even from an advice perspective, sometimes we also get too attached to these properties.
[1:07:21] SPEAKER_03: So as much as the law will protect you and you can go on with this transaction for
[1:07:26] SPEAKER_03: a very long time,
[1:07:27] SPEAKER_03: it's good to have an arm's length transaction when you're finding difficulties to
[1:07:32] SPEAKER_03: pay because this is a long-term facility and things happen.
[1:07:36] SPEAKER_03: You lose your job,
[1:07:38] SPEAKER_03: you will be retrenched,
[1:07:39] SPEAKER_03: you will get sick,
[1:07:40] SPEAKER_03: you may not be able to repay,
[1:07:42] SPEAKER_03: your source of income may just stop.
[1:07:45] SPEAKER_03: So things actually do happen within the mortgage process.
[1:07:48] SPEAKER_03: But sometimes you need to also just be realistic and say, okay, fine, I probably have a mortgage.
[1:07:54] SPEAKER_03: That if I go and sell through private treaty,
[1:07:56] SPEAKER_03: like Joffrey has mentioned,
[1:07:58] SPEAKER_03: I will actually sell the property,
[1:07:59] SPEAKER_03: recover the loan,
[1:08:01] SPEAKER_03: and also still get a balance out of that sale.
[1:08:04] SPEAKER_03: And you can get a smaller property or you can buy a land and construct again without a loan.
[1:08:10] SPEAKER_03: So there are so many ways.
[1:08:11] SPEAKER_03: to go about such property transactions where now it's becoming very, very difficult to service.
[1:08:17] SPEAKER_03: So it's sometimes to remove yourself from the situation.
[1:08:20] SPEAKER_03: I agree that there are some things maybe that you need to do a bit different,
[1:08:24] SPEAKER_03: but don't really hold on to the property where a situation where you can actually
[1:08:28] SPEAKER_03: just sell it on private treaty and get out of the transaction.
[1:08:32] SPEAKER_03: So that is what my advice would be, especially for people who have been unable to repay the mortgage.
[1:08:37] SPEAKER_01: Thank you so much, Beatrice.
[1:08:39] SPEAKER_01: Now we'll be summarizing some of the key thoughts that you want listeners to remember.
[1:08:43] SPEAKER_01: We have a lot of questions in the DMs and we'll collect a lot of them.
[1:08:46] SPEAKER_01: I'll send them out to the various speakers and then we'll try to collect some of
[1:08:49] SPEAKER_01: the answers for the various people.
[1:08:51] SPEAKER_01: We wanted to just take one and a half hours.
[1:08:54] SPEAKER_01: It seems like we had a lot of content to cover.
[1:08:56] SPEAKER_01: We'll try to have another session like this to try and deal with the questions that you have.
[1:09:01] SPEAKER_01: So I want to give each of the speakers
[1:09:04] SPEAKER_01: A minute or so to give us a quick wrap up.
[1:09:07] SPEAKER_01: I'll start with Stella, Lydia, Beatrice, and then Joffrey, that order.
[1:09:12] SPEAKER_01: So let's start with Stella,
[1:09:13] SPEAKER_01: your closing thoughts,
[1:09:14] SPEAKER_01: some things that you want the listeners to keep in mind and also tell us where
[1:09:17] SPEAKER_01: people can find you guys.
[1:09:19] SPEAKER_03: Thank you very much, Eric, for this wonderful opportunity.
[1:09:22] SPEAKER_03: It's been a fantastic engagement.
[1:09:24] SPEAKER_03: And I will echo that KMRC is a game changer and affordable housing is the way to go.
[1:09:31] SPEAKER_03: We all can own assets.
[1:09:33] SPEAKER_03: As long as we are able to keep within the limits and listen to the experts,
[1:09:37] SPEAKER_03: consult us,
[1:09:38] SPEAKER_03: and when we need to,
[1:09:39] SPEAKER_03: home ownership is possible for all of us.
[1:09:41] SPEAKER_03: Thank you.
[1:09:41] SPEAKER_02: Thank you so much, Eric.
[1:09:43] SPEAKER_02: And I want to thank the audience for making the time.
[1:09:45] SPEAKER_02: What I want to say is tell your friends to tell a friend and to tell a friend.
[1:09:50] SPEAKER_02: People should know about KMRC-backed loans.
[1:09:53] SPEAKER_02: We've done our best to tell the people around us,
[1:09:56] SPEAKER_02: but we need you also to just amplify and let people know that this product is available.
[1:10:02] SPEAKER_02: So whenever they are inquiring from these lenders,
[1:10:06] SPEAKER_02: please make sure that you inquire whether your lender or your proposed lender
[1:10:11] SPEAKER_02: is in partnership with KMRC so that, you know, you can take the benefit of that product.
[1:10:16] SPEAKER_02: But because today we were talking about common misconceptions,
[1:10:20] SPEAKER_02: I want to again emphasize that if you're a borrower and you find yourself
[1:10:25] SPEAKER_02: struggling to meet your obligations under these charge documents,
[1:10:28] SPEAKER_02: please,
[1:10:29] SPEAKER_02: the fear of losing one's home can be mitigated by staying informed.
[1:10:33] SPEAKER_02: Please seek legal advice, as I've assured you here.
[1:10:37] SPEAKER_02: We do not build to kill.
[1:10:39] SPEAKER_02: We have guidelines in the profession and keep an open line of communication with the lender.
[1:10:45] SPEAKER_02: Thank you so much.
[1:10:46] SPEAKER_02: Did you see where people can find you, Lydia and Stella?
[1:10:48] SPEAKER_02: I'm sorry.
[1:10:49] SPEAKER_02: So we are based at Merchant Square,
[1:10:51] SPEAKER_02: Block D.
[1:10:52] SPEAKER_02: As I said,
[1:10:53] SPEAKER_02: we practice under the brand name of CDH because we have a regional affiliation,
[1:10:58] SPEAKER_02: but the local office is known as Kietilo Office.
[1:11:02] SPEAKER_02: We are also on all social media.
[1:11:05] SPEAKER_02: Keep an eye out for our webinars,
[1:11:07] SPEAKER_02: our articles,
[1:11:08] SPEAKER_02: because we try as much as possible to bank all this concept to the public.
[1:11:12] SPEAKER_01: Beatrice, over to you.
[1:11:13] SPEAKER_03: Thanks, Eric.
[1:11:14] SPEAKER_03: My parting shot is to tell the listeners that
[1:11:16] SPEAKER_03: A mortgage journey or a home ownership journey through mortgage is not very complicated.
[1:11:21] SPEAKER_03: It's not daunting because once you understand the process and the steps that you go through,
[1:11:26] SPEAKER_03: it stops to be overwhelming and you actually enjoy the process.
[1:11:29] SPEAKER_03: And Upsize is here to work with you step by step in that home ownership journey
[1:11:34] SPEAKER_03: because home ownership is actually one of the biggest investments that we may make
[1:11:39] SPEAKER_03: in this lifetime.
[1:11:40] SPEAKER_03: And when we talk about mortgages of
[1:11:42] SPEAKER_03: up to 25 years, it does not mean that you're going to repay the mortgage for 25 years.
[1:11:48] SPEAKER_03: The average mortgage for people who take for 25 years is actually 8 to 10 years.
[1:11:53] SPEAKER_03: So they don't wait for 25 years to pay their mortgage.
[1:11:56] SPEAKER_03: So I want to wish the listener a fantastic mortgage journey.
[1:12:00] SPEAKER_03: Once you work with the right partner, you will really enjoy the process.
[1:12:04] SPEAKER_03: So thank you so much, Eric, and also for having me on your space.
[1:12:07] SPEAKER_03: It's always a pleasure to just help people to own homes.
[1:12:11] SPEAKER_01: Geoffrey,
[1:12:11] SPEAKER_01: now you as the partner-in-chief for these spaces,
[1:12:14] SPEAKER_01: you can let us know what's your pitch to listeners today?
[1:12:17] SPEAKER_00: It's actually possible to turn all their aspirations into a home.
[1:12:20] SPEAKER_00: We are actually here to change the narrative on home ownership.
[1:12:24] SPEAKER_00: We believe that the rent you are paying today is actually equivalent to your home.
[1:12:28] SPEAKER_00: That's why the rent is your home.
[1:12:31] SPEAKER_00: That is actually what we believe in KMRC.
[1:12:33] SPEAKER_00: And we say that the most efficient way of homeownership is actually through a KMRC funded mortgage.
[1:12:39] SPEAKER_00: So buy now and wait.
[1:12:42] SPEAKER_00: Don't wait to buy.
[1:12:43] SPEAKER_00: So you need to make your decision for homeownership today because it is possible
[1:12:48] SPEAKER_00: and we are making it possible.
[1:12:49] SPEAKER_00: And there is no catch in this.
[1:12:51] SPEAKER_00: Whatever we put on our website,
[1:12:53] SPEAKER_00: KMRC.co.uk is actually what you get from the partners we are working with.
[1:12:57] SPEAKER_00: We work very closely because these partners actually have a very clear MOU
[1:13:02] SPEAKER_00: understanding that we are actually here to shape the market.
[1:13:05] SPEAKER_00: It's a social good that we have to ensure Kenyans own their homes affordably and efficiently.
[1:13:10] SPEAKER_00: So we invite all Kenyans to actually go and inquire about a KMRC-funded home loan
[1:13:17] SPEAKER_00: from their financial institutions.
[1:13:19] SPEAKER_00: And in case of further inquiries, KMRC is always available to listen and guide where possible.
[1:13:25] SPEAKER_00: Asante ni sana.
[1:13:26] SPEAKER_01: Thank you.
[1:13:26] SPEAKER_01: That was an hour and a half long session.
[1:13:28] SPEAKER_01: We actually went almost two hours session on discussing common misconceptions about mortgages in Kenya.
[1:13:34] SPEAKER_01: My quick takeaway is, of course, is that foreclosure.
[1:13:36] SPEAKER_01: And it's something that Kenyans do have options in terms of dealing with.
[1:13:40] SPEAKER_01: That's a very key takeaway for me.
[1:13:42] SPEAKER_01: And therefore, Geoff also telling us about KMRC and how they can enable you to
[1:13:46] SPEAKER_01: own a home.
[1:13:46] SPEAKER_01: So very good points from all the speakers,
[1:13:49] SPEAKER_01: from the legal perspective,
[1:13:50] SPEAKER_01: from the primarily mortgage lender perspective,
[1:13:52] SPEAKER_01: from KMRC perspective.
[1:13:53] SPEAKER_01: We tackled a lot of the key questions that I had in mind myself and very well
[1:13:57] SPEAKER_01: informed at the end of this.
[1:13:59] SPEAKER_01: So hopefully our listeners will check the social media handles of the various
[1:14:02] SPEAKER_01: institutions that are engaged here today so they can keep engaging a bit more on
[1:14:05] SPEAKER_01: the various topics.
[1:14:06] SPEAKER_01: We'll try to have another conversation again on similar topics.
[1:14:09] SPEAKER_01: Thank you so much for all the listeners who've joined in.
[1:14:12] SPEAKER_01: Thank you so much for taking
[1:14:13] SPEAKER_01: one and a half hours of your time to come and listen to us discuss mortgages in Kenya.
[1:14:17] SPEAKER_01: For my panelists, thank you.
[1:14:19] SPEAKER_01: Such an able panel,
[1:14:20] SPEAKER_01: very well balanced,
[1:14:21] SPEAKER_01: I should say,
[1:14:22] SPEAKER_01: and very informative to listen to all of you discuss your various professional areas.
[1:14:27] SPEAKER_00: Thank you, Eric, for this opportunity.
[1:14:29] SPEAKER_00: We urge all Kenyans to participate in this space.
[1:14:32] SPEAKER_00: It is a reality.
[1:14:33] SPEAKER_00: You can actually own your home affordably.

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