KBA CEO CHAT - Pathways to Home Ownership

CEO | Dan Omoro, DIB Kenya, CEO
MONTH | September 2017
nuru mugambi
Good morning
nuru mugambi
How is everyone doing today
Chat Admin
Good morning everyone. Glad you could join us today for our second CEO Chat session.
Chat Admin
Todays topic is Pathways to Home Ownership and our host is Dan Omoro, CEO of DIB Kenya Bank.
Chat Admin
Welcome Robert, Eric, Victor, Andrew, Faith and Wallace.
Victor Thuku
Hello,glad to be here
Chat Admin
Good morning again. We would like to take this opportunity to formally welcome Dan Omoro CE DIB Kenya Bank to the chat room
Dan Omoro
Assalam Alaykum and good morning everyone.
Dan Omoro
It is my pleasure to be with everyone this morning. To put our heads together and around the topic today which is pathways to homeownership.
Eric Asuma
Good Morning Dan... welcome to the chat
Dan Omoro
Welcome Eric
Dan Omoro
Im happy to be there because homeownership is a very sentimental investment for Kenyans
Dan Omoro
Everyone wants to own a home...and Im here to give advise on what the industry is doing to help Kenyans to own homes. So Im looking forward to engaging with you and hearing your thoughts.
Dan Omoro
Welcome Victor
anna kihara
Good morning Dan
Dan Omoro
To get this conversation going...maybe I can ask you a question...What are the obstacles you face in your endeavors to own a home? Are there any opportunities that you see which you are not able to take advantage of because of these obstacles?
Eric Asuma
The current economic environment, characterized by slow growth, strict lending standards and tight credit, presents sobering challenges to would-be homeowners, particularly if they earn low incomes, as a bank, what are you doing to tackle this?
Dan Omoro
Eric you raise a very important question
Conrad Karume
Good morning Dan and everyone else online.
Eric Asuma
I mean what efforts are doing to make homeownership accessible to low-income and minority households?
Dan Omoro
It is true that low income earners are somewhat excluded from the current mortgage arrangements due to structural constraints that banks have, including financing long term investments with short term deposits. So banks need to and have tried to innovate around these constraints, by stretching the tenors for mortgages; by increasing the credit extended to cover the value of the home plus additional expenses etc. Banks also encourage other pathways such as unsecured financing that can support the purchase of plots of land; or down payments for mortgages.
Dan Omoro
Other channels available for low income earners include using SACCOs which provide financing based on your savings as well as guarantees from SACCO members.
Mark Adoyo
Good Morning from DIB Bank. Great to see my CEO tackling the issue of housing.
Kamau Kionga
developers have concentrated their markets in major cities and urban areas loosing the opportunity of capitalizing in low cost land in upcoming counties which could in turn push down the cost of housing hence affordable housing in such areas. with devolution ther is an exodus of skilled labour from traditional urban areas like nairobi to counties. is the industry willing to tackle this emerging market?
Dan Omoro
My advise for low income earners is to take an unsecured facility to purchase a plot. Pay off that facility. And then get a construction financing from a bank to go through the process. This is a slower / longer pathway, but it would support those with lower incomes.
Dan Omoro
Kamau those are good thoughts you raise.
Dan Omoro
You will find that banks are positioning themselves to tag along the opportunities that come with devolution. As you know devolution is only 5 years old and still evolving. It will be an area that definitely banks will want to play in.
Victor Thuku
2. Kenya has a polpulation of over 40 Million people, however, in 2016,the recorded uptake of mortgages were at 25,000 . What factors would you say influence this low uptake and how do we remedy it moving forward?
Dan Omoro
With respect to Kamau's point on low cost land in the counties...it is true that it would contribute significantly to reducing the overall cost of home ownership since land in urban areas is the biggest contributor to the cost of homeownership.
Dan Omoro
Thank you Victor.
Stephen Kuira
Good morning everybody. I have 2 questions. 1. How do people go about getting construction finance if you already have a plot? 2. Is it true that you can get it?
Dan Omoro
There are a number of factors..perhaps I will start by correcting the perception that the low number of mortgages means there is low homeownership.
Dan Omoro
The current legal framework for mortgages is expensive and lengthy. And so people opt to use other avenues to acquire their homes.
Conrad Karume
As a Kenyan in the self-employed category, my homeownership journey has taken a 'Do-it-yourself' approach mainly because accessing credit is a big challenge. Does the banking industry have taylor-made products for this segment of the market?
Dan Omoro
The registration process that we currently have in Kenya is inefficient. And it takes anywhere between 60 to 90 days to get through the process of charging a title. Of course there are many players involved, like the valuers, lawyers, KRA for stamp duty, and all of this contributes to making this process lengthy and expensive. And these are some of the reasons why the mortgage is not the most preferred avenue.
Dan Omoro
I think we are seeing signs of improvement in this process. Some of the registries are being automated and that is making the process shorter. Banks are also engaging with the service providers like lawyers and valuers to make the process smoother. And as I indicated earlier, some banks are actually financing these components of other service providers, to make mortgages accessible to Kenyans. And more recently we've seen the requirement for upfront payment of capital gains tax being lifted which will add more efficiencies into the process.
Dan Omoro
Good morning Stephen
Dan Omoro
Absolutely banks are more than willing to finance your construction using your existing plot as your security. Of course you will either have frequent income through employment or business, and this will be used to evaluate your ability to manage the repayments.
Dan Omoro
Construction finance is managed in stages, in a manner that whatever work you have done on adds value to the property (land plus the house), which is then used to advance you more financing for the next stage of the construction.
Margaret Munyiva
Good Morning everyone. I would like to ask what t
Mark Adoyo
What are your thoughts on land consolidation and then doing one great housing project with all ammenties like schools, hospitals, malls etc especially in the counties and leaving most of the land for agriculture?
Margaret Munyiva
What are your thoughts about hosing in Kenya. Are we experiencing a housing bubble?
Dan Omoro
Thanks Conrad for sharing your experience. I would say perhaps this 'Do It Yourself' approach is the most affordable way to own a home if you can raise the funds yourself. However, you can leverage on your income from self employment to get financing from banks to complete your project in case you get stuck in the process. As mentioned earlier, whatever work you have done on your property can add value that banks would take into consideration in terms of security for the financing.
Dan Omoro
Hi Margaret. My personal thoughts are that there could be over-concentration on apartments in the urban suburbs. However, having said that. I dont think there is a bubble, considering the demand for housing in Kenya generally outweighs the supply.
Dan Omoro
Thanks Mark
Dan Omoro
The only challenge with consolidation of land in counties would be cultural inhibitions where primarily people feel comfortable settling within their own pieces of land, handed down through generations. So it would be a very good thing if such developments would happen in the counties.
Kamau Kionga
do you have pre arranged agreements with developers wherby if a customer is interested with their houses they just apply for a mortgage and the customer moves in after apporval of the mortgage. this will significantly reduce TAT.
Dan Omoro
Thanks Kamau. Most banks have began working with developers to improve the experience customers go through during home acquisition. As such, as a homebuyer you would not have to interact with the various service providers involved since the bank would primarily be the link between the homebuyers and all the other service providers. This one-stop-shop approach is increasingly being used, where all documentary requirements are signed at one point for example at the bank and thereafter handed over to the various service providers on behalf of the customer.
Dan Omoro
I would add that besides this, banks partner with developers to offer incentives for homebuyers. For example negotiating reduced pricing for the property, as well as pricing for the financing.
Lawrence Njuguna
What is Shariah compliant morgage? What distinguishes it from the ordinary morgage?
Dan Omoro
Identifying the appropriate property that banks would be willing to finance is another hurdle that prospective homeowners face; however, now banks are providing support such as property tour services to assist prospective buyers in identifying homes. This showcasing approach is especially helping Kenyans in the diaspora.
Dan Omoro
In the past, Kenyans in diaspora have lost their savings to people who have defrauded them. So the partnership between banks and developers comes in handy because now those in the diaspora can easily wire money directly to the bank which will then pay the developer who has been verified by the bank.
steven adembesa
what the baby steps you can advice a person interested in home ownership?
Dan Omoro
Thanks Lawrence for your question on Shariah solutions, which is an emerging area in financing..and that is very close to our hearts.
Dan Omoro
Basically the difference is conventional banks would give you a loan to acquire your desired home / property. But for an Islamic bank, it would either acquire the property and lease it to you over the repayment period; or if it is for a shorter term, the bank would purchase the property and then sell it to you. These are just two examples of Shariah compliant finance, there are many others.
Dan Omoro
Thanks Steven...if you are young I would advise that age is on your side because most banks are willing to finance a facility for 25 years and some up to your retirement age. So if age is on your side, please use it to your advantage. The other steps I would advise is to take advantage of developments at conception where you buy a home off plan, and prices are normally cheaper but you have to be sure that the developer is credible.
ALI NETIA
we've heard the CBK governer say, the banks will revert to its lending system- free market, what are the cost of interest capping in kenyan market.
Dan Omoro
Other advise I would give you Steven is start small and grow from there. So if you can afford a bedsitter or a one bedroom now, I would advise that you buy. And as your income grows, you can use that property as security to acquire a bigger house or even sell it off to give you the cash to use as a deposit for a bigger house.
Lawrence Njuguna
Can a non Muslim acquire Shariah compliant finance?
Dan Omoro
Thanks Lawrence...Shariah compliant financing is available to anyone whether or not you are a Muslim.
Stephen Mirara
Hi Dan, Glad for this opportunity. Kindly advice the steps to acquire the a home being a young father with a title
Stephen Mirara
how soon can i acquire a business loan best rates
Dan Omoro
Thanks Ali for your question. The industry through KBA has been communicating issues it has observed since the Banking Amendment Act was assented to by the President. KBA has continued to educate the market on the Act's impact on the economy. We've also seen organisations like IMF advise the Government that the Act should be repealed. CBK as well as National Treasury have also indicated that the Act is not fit for purpose; and in the case for CBK they have indicated it is limiting their monetary policy role. So its in the interest of our economy for the Act to be repealed as the industry engages with policymakers on a solution that supports and protects borrowers; and at the same time creates opportunities for financiers.
Lawrence Njuguna
Can one obtain a morgage facility to acquire land first, then probably a top up later to build a house
Dan Omoro
We have seen increased demand for credit since the Act came to force. However, this demand has not translated into increased financing and disbursements in key sectors due to the portfolio and market risks, as well as rising cost of funds on account of higher deposit rates mandated by the act. The SME sector for example has been especially impacted by the decline in financing because banks have shifted lending to large corporations and government debt. This is a material shift and the long term effects will be felt on the economy, considering SMEs help address Kenya's unemployment concerns.
Dan Omoro
Thanks Stephen and congratulations on your new family status! You can use your title deed, depending on the location of the property, to acquire financing for construction on that land.
Chat Admin
Thank you all for your questions. We are about to wrap up this mornings chat session.
Conrad Karume
Sorry for taking the conversation off-course. How is the issue of Fore-closure handled in Shari'ah based mortgages? Is the property sold and the proceeds spilt between the bank and the mortgagee?
Chat Admin
Please send through any last questions you may have now so we can respond in the time remaining
Dan Omoro
Lawrence, the answer to your question is yes. Some banks are financing people to acquire land or plots first and then later the bank would offer construction financing to allow customers to develop the property.
Stephen Mirara
Dan please advice steps in acquiring an on going business loan
Lawrence Njuguna
Thanks Dan. Till next time, Cheers!
Dan Omoro
Thanks Conrad. Under Shariah principles, it depends on the structure. Where the customer owns part of the property, and has defaulted on their payments, when the property is sold by the bank, the customer will get a share of the proceeds based on their percentage ownership.
Gilbert Yegon
Morning everyone. Dan could you let us know what efforts are being done to ensure that we can easily access the financing.
Stellah Kinyua
thanks so much Dan, i have learnt alot
Dan Omoro
Gilbert thanks for your question and for joining us...we've discussed several options during the past hour, including mortgages, unsecured financing, and construction finance.
WALLACE LAGAT
Thanks a lot Dan that was insightful
Chat Admin
Thank you all for your questions and for making this chat session so engaging.
Dan Omoro
Most welcome Wallace
Chat Admin
We will now allow Dan to provide some closing remarks
Conrad Karume
Asante sana. Very insightful.
Dan Omoro
Stellah Im glad it was useful
Gilbert Yegon
Thanks will go thro all the charts
Stephen Mirara
Thanks Dan.
RAPHAEL KURIA
Thanks Dan for the Chat..very informative.
Dan Omoro
Thanks everyone for taking the time to go through this very important chat. Hopefully you have picked one or two things that would help you towards achieving your dream of homeownership. As an industry we are working hard to ensure that customers are protected and provided with the support to achieve their dreams. Here at DIB Bank Kenya, being 100 percent subsidiary of Dubai Islamic Bank in the UAE, we are quite excited to have entered the Kenyan market and are looking forward to partner with all Kenyans from all walks of life and religions. I invite you to come speak with us, visit our website at www.dibkenya.co.ke.
Chat Admin
Thank you Dan for your time and insights.
Dan Omoro
Good bye and have a great weekend!
WALLACE LAGAT
Great weekend too
Chat Admin
Goodby all and have a great weekend. See you all next week for our third and final chat on Digital Innovation.
Chat Admin
If you missed last weeks chat or came part way through this one please check out the chat archives at http://chat.kba.co.ke/index.php?r=chat/archives
Chat Admin
We will be continuing our time with Dan Omoro on the KTN Facebook Live so please join us there.....
Stephen Kuira
Thank you Dan