NAIROBI, Kenya — The State Officers’ House Mortgage Scheme Fund is seeking regulatory changes that would significantly expand its lending mandate to include home renovations and the purchase of land for future residential development.
The Fund is pushing for amendments to the Public Finance Management (PFM) Regulations, which currently limit lending strictly to fully constructed houses, locking out state officers who wish to improve existing homes or buy plots for later development.
The proposed changes come amid growing pressure on the scheme, with the Auditor-General’s 2024/2025 report flagging high default rates and inadequate funding as demand continues to outstrip available resources.
Under existing rules, the Fund cannot finance house improvements or allow beneficiaries to use their gratuity — a lump sum paid upon retirement or resignation — to offset outstanding mortgage balances.
This, according to the audit report, has constrained flexibility for borrowers and contributed to repayment challenges.
“The Fund has had its own fair share of challenges,” the Auditor-General noted, citing regulatory gaps that exclude the purchase and improvement of houses, acquisition of land for future housing, and funding strain following the inclusion of more state officers.
The scheme has recently expanded its coverage to include senior military officers, ambassadors, high commissioners, diplomats and consular officials — a move that has further stretched its financial capacity.
Despite the challenges, lending activity remains strong. During the year under review, the Fund processed 241 mortgage applications worth Sh6.584 billion and forwarded them to partner banks for approval.
Of these, 205 loans valued at Sh5.3 billion were fully disbursed, while 26 applications amounting to Sh619 million were approved but had yet to be released.
The affordability of home ownership remains a broader concern beyond the scheme.
A joint survey by Zamara, the Centre for Affordable Housing Finance in Africa and FSD Kenya shows that only four per cent of Kenyans can afford a Sh10 million mortgage.
Out of 145,205 pension scheme members assessed, just 6,146 — about 4.23 per cent — qualify for loans above that threshold.
Central Bank of Kenya (CBK) data further illustrates the pressure on borrowers, showing that the average home loan has risen from Sh6.9 million in 2013 to Sh7.5 million in 2014, and now stands at about Sh9 million, driven by higher property prices and upfront transaction costs.
If approved, the proposed regulatory amendments could offer state officers greater flexibility in meeting housing needs while easing pressure on the Fund by aligning lending rules with market realities.
