To Build Your House or Take a Mortgage: Housing demand in Kenya is on an all-time high and Kenyans are exceedingly keen on acquiring a roof under their heads. And there are two open options available for them; either to build their own house or take a mortgage.
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According to the World Bank, there is an estimated accumulated housing deficit of over 2 million units, and nearly 61 percent of urban households live in slums.
The Breton Woods Institution points out that there are fewer than 25,000 mortgages outstanding in Kenya; with an average size of Ksh 8.3 million (US$80,000 at a current Ksh/USD rate of 103.7), up from Ksh 4.1 million in 2010, primarily as a result of higher property prices.
In the course of my 18 years of experience in the real estate sector under Optiven Group, I have observed one interesting trend; thousands of Kenyans prefer to build their own homes as opposed to taking up mortgages.
Drawing from this aforementioned expertise, here are 5 Reasons why they prefer building:
1. The Mortgage rates are very high; some of these rates are as high as 21% and as low as 14%. This seems to put off many suitors who prefer building their own homes.
2. The mortgage processing comes with various exorbitant costs. These include house searches, valuation costs and legal costs. The process itself might take up to 8 months. This is a put-off.
3. Mortgage houses are standard and fundamentally, Kenyans are a diverse society with varied tastes and most prefer coming up with their own house designs, build at their own pace and still get to enjoy the real experience of coming up with a house from scratch.
4. Building an own house is cheaper since there is no markup or other third party charges. When you build your own house, you are able to fit into your own budget. You can actually build a growing house as opposed to mortgage where you pay for things that you may not even require. For instance you may not need a swimming pool yet a mortgage might make you pay for it.
5. Building your own house gives you a chance to set it up at your preferred location: This is a major plus.
Those who prefer the Mortgage way have the following Reasons
1. Mortgage gives someone the discipline to both save and invest at the same time.
2. The Mortgage enables the owner to enjoy the house immediately instead of renting if you were to have taken the building option.
3. The house under mortgage, though expensive initially, appreciates with time and helps one to reduce cost of rental.
4. With the hustles and bustles of life, one may not be able to spare the lengthy time required to build an own house and a mortgage becomes the best time-saving option.
5. Mortgage enables one to enjoy tax relief especially if it is their first residential house. This encourages the mortgage lovers.