President Ruto’s low-cost homes price and payment plan revealed

Kenyans will pay between Sh840,000 and Sh5.76 million for low-cost homes under President William Ruto’s housing programme, which targets putting up 250,000 units every year.

A confidential government document seen by the Business Daily shows the houses will be categorised into social, affordable and market units.

The fresh categorisation signals a policy shift that will also open the door for workers earning more than Sh150,000 monthly to also own homes through the State-funded programme.

Under the plan spearheaded by the State Department for Housing and Urban Development, social housing developments will comprise one-, two- and three-room houses targeting slum dwellers.

The affordable housing units will be made of studios (bedsitters), two- and three-bedroom apartments, while market-driven developments will have two- and three-bedroom houses.

Units categorised as affordable will account for half of the houses to be built under the programme, while market-rate apartments will take 30 percent share, according to the policy document titled Achieving the Housing Agenda.

The remainder 20 percent will be social housing units, the document prepared this month states.

In a separate interview on Wednesday last week National Housing Corporation (NHC) managing director David Mathu said: “AHP (Affordable Housing Programme) is not just affordable housing. We are looking at three products: social housing, affordable housing and also the market-driven products, which are affordable.”

Read: US fund to build 5000 affordable houses in Kenya

NHC is the lead implementer of the government’s housing programmes under the State Department for Housing and Urban Development and is amongst the developers of the low-cost units.

The classification adopted by President William Ruto administration slightly differs from his predecessor’s failed AHP which had targeted putting up 500,000 units between 2018 and 2022.

The Ruto administration has replaced one-bedroom apartments under the affordable housing category with studios, and added a new “market” category of two- and three-bedroomed units.

The document puts the cost of social housing units at Sh42,000 per square metre (sqm), while the same space will be priced at Sh48,000 for affordable housing apartments and Sh72,000 for market-rate houses.

The price of the units, which will be sold under tenant purchase scheme (TPS), is based on the estimated cost of construction plus 20 percent financing cost and a markup which differs depending on the housing category.

The markup, or profit, has been pegged at 9.4 percent for the social housing units, 14.3 percent for affordable apartments, and 20 percent for market rate housing.

Units under market rate housing will attract a higher interest of 9.0 percent on reducing balance compared to affordable apartments at 6.0 percent and social housing at 3.0 percent.

Consequently, a 20 square metre room will cost Sh840,000 with the beneficiary required to deposit 10 percent of the price before moving in, and clearing the remainder with monthly payments of Sh3,200 over 30 years when they will become owners.

The cost is higher than the estimated Sh600,000 under the failed programme by the previous administration which was to be paid under a shorter tenure of 25 years at an interest of three percent.

A 30 square metre two-room house will cost Sh1.26 million, with the prospective owners required to deposit Sh126,000 and thereafter pay Sh4,800 monthly for 30 years, while the price for a 40 square metre three-room unit is Sh1.68 million paid through Sh168,000 deposit and Sh6,400 monthly payments.

A bedsitter, or studio, on 20 square metre space will cost Sh960,000 with occupiers charged Sh5,200 monthly payments for 30 years on top of a Sh96,000 deposit.

A beneficiary of a two-bedroom house of 40 square metres size under the affordable housing category will deposit Sh192,000 upfront and pay Sh10,400 monthly for 30 years to offset Sh1.92 million total cost and become homeowners.

A three-bedroom unit sitting on a space of 60 square metres will cost Sh2.88 million, with occupiers paying Sh15,600 monthly for 30 years after depositing 10 percent of the house value.

Under the market rate housing category, a two-bedroom house measuring 60 square metres will be priced at Sh4.32 million repayable through a deposit of Sh432,000 and monthly payments of Sh31,300 for 360 months.

Homebuyers who will occupy three-bedroom apartments sitting on 80 square metres under market rate housing will deposit Sh576,000 and pay Sh41,800 for 30 years to become owners.

“There are conditions on how you get a house. You must apply and it is located based on one ID, one house and on first come basis. Whoever meets the initial deposit earlier will be preferred,” Mr Mathu said Wednesday last week.

“So assuming you even pay the entire amount for the house you want outright, but there’s someone else who had made a deposit ahead of you, we are still going to lock the unit for that person who made the 10 percent contribution earlier even if they don’t have the balance.”

All employees, whether on permanent and pensionable terms or contract-based engagements, are from July required to make contributions towards the Affordable Housing Fund, widening the reach of collections.

Dr Ruto rallied Parliament to enact the housing fund through the Finance Act 2023 despite protestation from employers and civil society groups.

The fund is gross-on-gross taxation on workers income where the Kenya Revenue Authority uses same gross to also calculate the Pay As You Earn, a form of double taxation.

Read: Affordable housing: A real shot at home ownership or hot air?

The Treasury projects deductions from the levy to amount to Sh63.2 billion this financial year ending June 2024, rising to Sh70 billion in the 2024/25 fiscal year and Sh78 billion in 2025/26.

The Ruto administration is targeting to develop up to 250,000 low-cost housing units and associated social and physical infrastructure annually under the Affordable Housing Programme(AHP), which is at the heart of the government’s jobs creation agenda.

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