Why Owning a Home in Kenya Remains Out of Reach for Many

Many Kenyans face significant barriers to homeownership due to substantial upfront costs required before mortgage repayments can begin.

The Central Bank of Kenya’s 2024 Annual Supervision Report shows that the average mortgage interest rate is 14.9 percent, with typical loan terms of 11 years. Servicing a Sh9 million mortgage under these conditions requires monthly payments of around Sh140,000. 

Banks also require borrowers to retain at least one-third of their income after debt repayments, meaning a prospective homeowner would need a gross monthly salary of more than Sh420,000. Despite these requirements, Kenya’s mortgage market remains small. 

Fewer than 30,000 mortgages are active nationwide, compared with a population of approximately 50 million. Analysts say that high interest rates and the burden of initial fees deter potential borrowers.

Financial consultant Carol Koome advises careful planning before taking a mortgage or construction loan. “A construction loan can be helpful if you have a plot and steady income. Without careful calculation, it can quickly become a financial trap,” she says.

Banks require payment of various upfront charges before approving loans. These include loan processing fees, legal costs for land searches and title registration, valuation fees, and mandatory insurance premiums. Together, these costs can amount to hundreds of thousands of shillings, often exceeding first-time buyers’ expectations.

Construction loans differ from mortgages in structure and risk. Construction loans are typically disbursed in stages and are short-term, tied to project progress. Mortgages require repayment from the first disbursement, regardless of whether the borrower has moved into the property. 

“A mortgage must be serviced from day one, which can be challenging during the transition from renting or if income is irregular,” Ms Koome notes.

Experts also point out that banks’ commitment fees to reserve funds can add more than five per cent to the initial property cost, creating an additional barrier for middle-income earners.

Mutinda Mutuku, President of the Institute of Quantity Surveyors of Kenya, says that inadequate planning contributes to stalled construction projects. “Many projects start without a detailed Bill of Quantities, leaving homeowners vulnerable to overspending. Poor documentation, design changes, and unqualified contractors worsen the problem,” he explains.

Ms Koome emphasises the need for financial discipline. Borrowers should maintain emergency funds, medical cover, and retirement plans to keep loan repayments within 30 to 35 percent of gross income. She also recommends setting aside contingency funds for unexpected construction costs.

Banks defend these fees as necessary safeguards, including valuation fees for accurate pricing and legal fees to prevent disputes. Critics, however, argue that the cumulative cost makes mortgages inaccessible for most Kenyans, limiting ownership largely to high-income earners.

Policy experts and housing advocates stress that reducing upfront costs is key to expanding mortgage access and supporting affordable housing initiatives. Ms Koome concludes that careful planning, professional advice, and phased construction can mitigate risks, making homeownership achievable for those prepared to manage both costs and cash flow.