Kenya continues to grapple with a severe housing challenge driven by rapid population growth and urbanization. With population growing at 2.0% annually and urbanization at 2.8% both above global averages the country faces an annual housing deficit of about 200,000 units, while developers deliver only around 50,000 units against a demand of 250,000. On the supply side, high construction costs and limited developer capital remain major constraints, while on the demand side, reduced purchasing power due to inflation, taxes, and broader macroeconomic pressures has made homeownership difficult for many. Urban home ownership stands at just 21.3%, meaning 78.7% of city dwellers are renters, compared to a national average of 61.3%.
To address this gap, the government has rolled out the Affordable Housing Program (AHP), now anchored in the Affordable Housing Act 2024. The program offers incentives such as public land allocation, a reduced 15% corporate tax rate for qualifying developers, stamp duty exemptions for first-time buyers, and VAT relief on selected construction materials. On the demand side, the goal is to expand mortgage accounts from under 30,000 to over one million in the long term, with a focus on affordable loans featuring monthly repayments below KSh 10,000 for low- and middle-income households. The Kenya Mortgage Refinance Company (KMRC) serves as a key enabler in this effort.
KMRC is a non-deposit-taking public-private partnership regulated by the Central Bank of Kenya. Incorporated in April 2018 and authorized to begin lending in September 2020, it does not lend directly to individuals. Instead, it acts as a wholesale financier, providing long-term, low-cost, and fixed-rate funding to primary mortgage lenders — including banks, microfinance institutions, and SACCOs so they can offer more sustainable mortgages without liquidity concerns from short-term deposit fluctuations. Its broader objectives include extending mortgage tenors, standardizing lending practices across the industry, boosting capital markets through corporate bond issuances, reducing transaction costs for lenders via pooled funding, and encouraging new players to increase competition and product diversity.
In 2024, KMRC refinanced 3,855 mortgages across 36 counties, representing 12.8% of the total 30,016 active mortgage accounts in Kenya. This marked a 23% growth in refinanced mortgages from the previous year, with total disbursements reaching approximately KSh 14.0 billion. Financially, the institution showed solid performance: total assets grew 25% to KSh 32.3 billion, while profit before tax rose 69% to KSh 1.82 billion. These figures reflect KMRC’s expanding role, even as Kenya’s overall mortgage-to-GDP ratio remains low at around 1.8%, highlighting the significant untapped potential in the housing finance sector.
Despite this progress, challenges persist. Mortgage account growth has been modest, with a ten-year compound annual growth rate of about 3.1%. Affordability remains a barrier for most Kenyans, long-term funding for lenders is still limited, and structural inefficiencies continue to constrain the market. To accelerate impact, KMRC can draw lessons from similar institutions abroad. Recommendations include offering innovative financing products for residential developers with incentives for green building, developing long-term mortgages of up to 30 years targeted at low- and middle-income earners, introducing specialized products for units under the Affordable Housing Program, diversifying into non-residential (commercial and industrial) mortgages to reduce risk, and launching “elite” mortgage products for high-end segments to balance the portfolio amid rising property prices, particularly in the Nairobi Metropolitan Area.
Looking ahead, KMRC is well positioned to deepen its reach by onboarding more primary mortgage lenders, operationalizing the Risk Sharing Facility to manage credit risk, and introducing tailored products for different market segments. With continued government support through the Affordable Housing Act and stronger collaboration across the sector, KMRC can play a larger role in bridging Kenya’s housing deficit and making homeownership more accessible.
Overall, while KMRC has recorded commendable growth since commencing operations, its current coverage of just 12.8% of the mortgage market shows there is still substantial room for expansion. By implementing innovative approaches and learning from international best practices, the institution can contribute meaningfully to Kenya’s goal of inclusive housing and broader economic transformation.
Here is the link to the full report;
https://cytonnreport.com/research/cytonn-weekly-12-2026#focus-of-the-week
