State pulls plug on civil service home loans plan

Civil servants are set to miss out on home loans, dealing yet another blow to the State’s affordable housing drive as proposed regulations seek to lock out most beneficiaries.

For the second year in a row, the Treasury has failed to allocate cash to the State Department for Housing for disbursement of loans under the Civil Servants Housing Scheme.

The scheme — intended to encourage uptake of mortgage among civil servants — allows government workers to access loans and pay their mortgage up to five years after the official retirement age of 60.

The 2020/21 budget setback comes just weeks after the housing ministry unveiled draft regulations that, if approved, will require beneficiaries to contribute for at least six months and save up to 10 percent of the house price to qualify for affordable houses.

Experts have warned that such regulations could lock out most beneficiaries since it is no longer mandatory for employers to match the contributions and beneficiaries are allowed to contribute as low as Sh200 per month.

When he launched 1,370 low-cost houses for civil servants in February, Housing PS Charles Hinga said the ministry expected to net Sh5 billion from the sale of the units.

In Nairobi with 548 such units, the price range between Sh1.5 million and Sh4 million while the 220 such units in Embu are sold between Sh3.5 million and Sh4.8 million.

Similarly, Machakos with 200 houses under construction has its houses being priced between Sh3.3 million and Sh4.3 million and Kiambu, with 193 houses has its units sold between Sh2.25 million and Sh5.4 million. In Kisumu, the State has constructed 210 houses, which are being offered for sale at prices between Sh2.25 million and Sh5.4 million.

In April 2018, the Industrial Court rejected State’s bid to build its housing fund via a payroll tax of 1.5 percent of basic salary on all workers.

Last year, the Civil Servants Housing Scheme Fund facilitated 989 civil servants with mortgage loans for construction and purchase worth Sh4.474 billion through the KCB Group #ticker:KCB and Housing Finance (HF) Group #ticker:HFCK as at June 30, 2018.

KCB advanced loans worth Sh2.95 billion while HF disbursed Sh1.52 billion. The ministry said out of the houses developed through the Civil Servants Housing Scheme Fund, a total of 411 housing units were reserved for rental to civil servants.

Civil servants are required to repay their loans up to the age of 65 years, up from the current limit of 60 years.