By O’Brien Kimani
Pressure is mounting on parliament to review the Banking Amendment Act that capped interest rates at 4 percent of the Central Bank Rate with players in the real estate sector decrying the law.
Optiven Chief George Wachiuri says the real estate sector has seen a major drop in transaction as banks withhold lending to the private sector.
Enacted in October last year, the banking amendment law capped interest rates on loans at 4 percent above the benchmark lending rate down from the previous average of 24 percent.
However, almost one year since the law came into effect interest rates have dropped to below 14 percent, but the banks are not lending to the private sector, opting to lend to the government through bonds and bills.
One of the most affected sectors is the real estate where business has been slow.
Kenya which suffers widespread house shortage has close to 25,000 mortgage accounts in a country of 45 million people due to the high cost of credit.
In April this year, the World Bank reported that mortgage lending dropped by two thirds after introduction of the interest rate cap, pushing the mortgage market to a 15-year low by the end of 2016.
Central bank data shows that, loan approvals declined by six per cent between December 2016 and February 2017 as private sector credit growth fell to 4.3 per cent in December 2016 compared to more than 17 per cent a year earlier.
Speaking when Optiven received the super brand certificate from Super brand East Africa, Wachiuri urged the ministry of lands to hasten the process of constituting lands boards to fast track issuance of title deeds.