Housing: Plan unveiled to tap Sh1.5tr pension industry
Kenya plans to tap the Sh1.5 trillion pension industry with the formation of Kenya National Real Estate Investment Trust to mobilise funds for property development.
The plan is to develop Real Estate Investment Trusts (REITS) which will facilitate funds collection from pensions and I-REITs which will facilitate the transfer of properties to buyers.
“For the first time, we believe we need to really make our REITs market vibrant. We propose that KNR will be the mobiliser of funds from the pension industry and Saccos and aggregate our resources into a vehicle,” said Hosea Kiili, the president of the Association of Pension Trustees.
He was speaking during the affordable housing stakeholders conference held at KICC last week. “Our proposal which we have shared with the Head of State, is to establish the Kenya National Reits, backed by all major schemes and regulators in order to guarantee its legitimacy and funding,” he added.
Kenya has started the process of establishing a secondary mortgage market where lenders would provide discounted house loans to long-term investors including pension funds and insurers.
Kenya Mortgage Refinancing Company (KMRC) is collaborating with banks to create mortgage-backed securities, in which the lenders will pool mortgages with comparable features and offer them to investors, who will profit from the monthly mortgage payments made by homebuyers.
Johnson Oltetia, chief executive of KMRC, said the State-backed company is in discussions with the Kenya Bankers Association and other parties to develop standard lending conditions for mortgages across banks, microfinance organizations, and savings and credit cooperative societies.
“That (uniform lending standard) will lead to a very critical thing (in mortgage market development).
“Once you have attained standardisation, we expect that we can issue more structured products like mortgage-backed securities at some stage,” he said.
Mortgage-backed securities give long-term investors like pension funds, insurance companies, and hedge funds, the ability to effectively lend money to homebuyers while earning returns through regular interest and principal payments.