Urithi urge Govt to create Ksh 50b stimulus package to low-cost house developing firms

Urithi Housing Cooperative Society Chairman Samuel Maina.

Urithi Housing Finance Co-operative Society now wants the Government to create a Ksh 50 billion revolving fund as part of a stimulus package to low-cost house developing firms.

The call comes against the backdrop of the effects of Covid-19 pandemic which has caused a major slowdown in the real estate sector.

Urithi Chairman Samuel Maina said real estate is a capital intensive sector and will need assistance to recover from the lull caused by the virus.
“Capitalisation is very high unlike other sectors and one is required to inject a lot of money to buy land and develop with financing coming from lenders,” he said.

Maina says financial institutions are cautious to invest in real estate firms due to the crunch recorded, especially in the top stratum of the economy.

He said the bottom of the pyramid had remained secure in terms of demand, while the upper segment of the sector is almost crippled due to low uptake.

“Four years ago, there was huge uptake of high end investment in houses in Kileleshwa and Westlands before the bubble burst in 2017.” He said.

Demand for low end housing however remains high with the Country already experiencing an annual deficit of 200,000 units, and a backlog of more than one million houses.

On the mortgage, the sector has only 25,000 subscriptions out of a national population of 47 million.

To service low the cost segment, the off-the-plan housing plan emerged as the best solution to plugging the gap as they offer a snug entry point to home ownership.

“The Government should inject some seed capital in co-operatives to kick-start them and enable them meet the demands of their clients since they have the infrastructure and cut across different divides and geographically spread,” Maina said.

Revolving will mean that the funds invested will eventually flow back as interest or gains on participation and will be made available for a new innovative project and investment.

Institute of Budget and Devolution director Elias Mbau projected that the property market would face tougher times as builders, buyers and sellers lose cash due to the fallout from Covid-19.

He said for the housing sector to rebound, the economy will need to grow at over six per cent, which is unlikely due to the virus.

Such a percentage, Mbau added, depicts high cash flow, less inflation and low demand on credit hence relaxed repayment terms. He said currently, coronavirus and floods had slowed economic growth projection to below two per cent.

“The more reason why the Government should pump money to critical sectors like housing,” He added.

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