New scheme gives CSs, governors access to cheap house loans

State officers under the Executive arm of government will soon be able to access cheap loans to buy and construct their residential houses in a new housing scheme.

Cabinet secretaries, county governors, the Attorney-General, the Chief of Defence Forces and the Auditor-General will now be able to get up to Sh40 million in loans in the government-funded loan scheme.

The scheme has already been approved by the Salaries and Remuneration Commission and is now being implemented through the National Treasury

Regulations establishing the housing scheme fund for State officers are now ready and awaiting consideration in the National Assembly.

Anchored on the Public Finance Management Act (PFMA), 2012, the regulations establish the State Officers Housing Scheme Fund and set up a clear framework for managing the mortgage scheme.

The fund is established to provide for a government-funded loan scheme for the purchase and development of property by State officers.

The regulations, drafted by the National Treasury Cabinet Secretary Henry Rotich, guide the administration of the fund, whose initial capital of Sh1 billion was appropriated by Parliament in the 2014/2015 financial year.

In line with the PFM Act 2012, more funds may be voted towards the fund in subsequent financial years.

BENEFITS SET BY SRC

The housing scheme is one of the benefits set by the Salaries and Remuneration Commission for all State officers in the national government alongside a car loan scheme.

Currently, however, the scheme for State officers only exists in the Judiciary and Parliament.

Mr Rotich says the National Treasury is expected to establish a similar scheme for State officers in the Executive.

“Section 24 (4) of the Public Finance Management Act (PFMA), 2012 allows the CS for the National Treasury to establish a public fund. These regulations are therefore firmly anchored in the provisions of the Public Finance Management Act-2012,” he stated.

The benefits are part of a strategy to motivate State officers as well as attract and retain skills within the Public Service.

Loans of between Sh4 million and Sh40 million will be granted to State officers under the scheme. Principal secretaries, chairpersons of independent commissions and the Controller of Budget will be eligible for loans of up to Sh35 million.

Security chiefs, namely the Director-General of the National Intelligence Service, the Inspector-General of Police, the deputy of the Chief of Defence Forces, the Commander of the Kenya Army, the Commander of the Kenya Navy and the Commander of the Kenya Air Force will be able to get housing loans of up to Sh30 million.

LOWEST AMOUNT
The lowest loan amount will be Sh4 million to be granted to officers in the grades A, B, C, D, E and F and equivalent grades in the Public Service.

The mortgage scheme fund will be managed by an advisory committee to be established within the National Treasury.

State officers will be expected to strictly utilise loans obtained from the fund for the purchase or development of residential property for their occupation or equity release for improvement of the residential house.

Repayment of a loan obtained under the scheme will be spread within a period of 20 years or before the borrower attains retirement age, whichever comes earlier.

State officers appointed at the age of 70 or above will be required to repay the loan within the duration of their appointment.

A loan granted under the scheme will be funded at the rate of 90 per cent of the value of the property but will not exceed the maximum loan threshold set in the schedule. This, however, is based on one’s ability to pay and repaid by the check-off system.

Interest payable on a loan will be set at the rate of at least three per cent per annum on a monthly reducing balance or other rate as may be determined by the advisory committee from time to time. The interest will be charged to the borrower.

LIFE INSURANCE

Borrowers under the scheme will also be required to take and maintain a life insurance policy and a fire insurance policy with an insurance company approved by the advisory committee at a cost to be paid out of the fund but debited in the borrower’s account.

State officers who obtain the housing scheme loans and default in repayment for three consecutive months, however, stand to lose out as the advisory committee will at this point repossess and sell the property to another deserving officer.

Officers who leave the government service before clearing repayment of a loan obtained under the scheme may be allowed to continue repaying by the advisory committee on the same terms as set out in the regulations. However, where a borrower defaults in a period of four months, then the outstanding loans will revert to the prevailing commercial interest rate.

Mr Rotich said the National Treasury would guide State officers in the national government on how to access the house mortgage facility.