Kenya’s Mortgage Market Poised for Growth in 2025

Kenya’s housing and mortgage market is poised for significant growth in 2025, driven by increasing urbanization, expanding middle-class demands, and government-led affordable housing initiatives. As the country navigates challenges such as affordability, inventory shortages, and the need for digitization, key stakeholders—including financial institutions, developers, and policymakers—are implementing strategies to foster growth. We explore the opportunities, challenges, and pathways to unlocking Kenya’s mortgage market potential.

1. Emphasis on Education and Trust-Building

Mortgage uptake in Kenya remains low, with only a small percentage of the population accessing home financing. This is largely due to a lack of awareness and mistrust in the lending process. To address this, lenders must invest in borrower education programs that simplify mortgage products, clarify terms, and explain the long-term benefits of homeownership. Community outreach initiatives, workshops, and partnerships with housing cooperatives can demystify mortgages and encourage uptake.

Building trust is equally crucial. Transparent lending practices, consistent communication, and ethical marketing will enhance the reputation of financial institutions. For instance, providing clear information about repayment plans, interest rates, and penalties ensures that borrowers make informed decisions, thereby reducing defaults and fostering confidence in the mortgage system.

2. Leveraging Technology for Seamless Processes

The integration of technology into mortgage origination is transforming housing finance globally, and Kenya is no exception. Digital mortgage origination systems, such as Finacle or Oracle FLEXCUBE, can streamline the loan process, reducing paperwork, enhancing accuracy, and speeding up approvals. Technology also enables mobile access, which is particularly relevant in Kenya, where mobile banking services like M-Pesa have revolutionized financial inclusion.

Beyond origination, lenders can use data analytics to assess creditworthiness more effectively, while borrowers can benefit from tools that provide real-time updates on application progress. Digital platforms also offer the potential for a fully paperless process, further reducing costs and making mortgages more accessible to a broader audience.

3. Addressing Inventory Shortages

One of the major barriers to mortgage growth in Kenya is the shortage of affordable housing. The government’s Affordable Housing Programme (AHP), which aims to deliver 500,000 affordable homes, is a step in the right direction. However, the private sector must complement these efforts by increasing housing supply, particularly in urban areas where demand is highest.

Developers, in collaboration with financial institutions, can explore innovative construction methods such as prefabricated homes and 3D printing to lower costs and accelerate project timelines. Additionally, public-private partnerships (PPPs) can provide developers with incentives such as tax breaks, streamlined approvals, and access to affordable land. By addressing supply challenges, the market can meet the growing demand for homeownership.

4. Adapting to Changing Borrower Needs

Kenyan borrowers are increasingly seeking personalized mortgage solutions that align with their financial situations. Traditional fixed-rate mortgages may not suit everyone, especially in a market where interest rates fluctuate. Lenders can introduce variable-rate mortgages, adjustable repayment schedules, and hybrid loans to cater to diverse needs.

Moreover, low-income earners and informal sector workers—who form a significant portion of the population—are often excluded from traditional lending criteria. Innovative products, such as micro-mortgages and group lending schemes, can provide these groups with access to home financing. Incorporating flexible repayment terms that align with irregular income patterns can further promote inclusivity.

5. Strengthening Government Support and Policies

The Kenyan government plays a pivotal role in creating an enabling environment for mortgage growth. Initiatives like the Kenya Mortgage Refinancing Company (KMRC) have improved liquidity by offering affordable refinancing to primary lenders. Expanding KMRC’s reach and lowering refinancing rates can encourage more institutions to offer competitive mortgage products.

Tax incentives for developers and first-time homebuyers can also stimulate the market. For example, VAT exemptions on construction materials for affordable housing projects can reduce costs, while tax deductions on mortgage interest can make homeownership more attractive. Enhanced regulatory frameworks will further ensure that lenders operate transparently and borrowers are protected.

6. Collaboration Between Stakeholders

The success of Kenya’s mortgage market depends on collaboration among all stakeholders. Developers, lenders, regulators, and policymakers must work together to address systemic challenges. Industry associations, such as the Kenya Bankers Association (KBA) and the Architectural Association of Kenya (AAK), can play a critical role in fostering dialogue and innovation.

Additionally, international partnerships can bring in expertise and financing. For instance, collaborations with global housing finance institutions can provide technical assistance, while donor funding can support initiatives targeting low-income housing.