Sources Of Funding For the Housing Sector
When building a house or setting up a building for rental purposes, you should have enough money because construction is not a cheap undertaking. There are many ways you can fund your project. We shall look at some of the sources for this funding;
A SACCO is defined as a self-help organization in which a group of people come together and save money and through this, they are able to give loans to their own members. According to a study by the World Bank, in mid-2019 SACCOs provided approximately 90% of Kenya's total housing finance. Most of these SACCOs offer loans with low interest rates of up to 12%, to qualify, however, you must be a member and must have saved with them for at least 6 years. They offer loans of up to three times one's saving and repayment can stretch for several years.
They have been shown to be one of the most convenient and effective methods of saving and investing for low and middle-income earners. The Kenyan government through Kenya Mortgage Refinance Company (KMRC) has partnered with these SACCOs to offer affordable mortgage financing at fixed single-digit rates and repayment periods stretching to a maximum of 25 years. This has made it very convenient for those with low incomes.
Crowdfunding in real estate is when people come together and raise money to invest or finance a home. We have seen in some situations over the past when maybe a family might have experienced a tragedy and might have lost their homes and people come together to raise money and build a home for them.
Crowdfunding in real estate allows investors to invest in properties that were traditionally reserved for the wealthy. Anyone is able to be a shareholder in real estate property. This enables one to have an investment that allows them to earn money on the side.
3. Private Cash
If you are financially able and have the money to invest, you can. By investing through maybe putting up rentals, you will have secured your generation's future in a way. It is always wise to invest, with time, the building or two you will have put up will be worth much more in the future.
Joint ventures combine the expertise of a real estate developer and their financing capability with the landowner's contribution in the form of land. This is a good investment idea as you might have land that you don't know how to use, you can partner with someone and this will definitely enable you to earn profit. It has steps involved but we shall dwell on that later. The biggest problem with this is getting the right partner and having the right processes of managing conflicts when they arise between both parties.
5. Tenant Purchase Scheme
It is defined as a lease agreement where the portion of the monthly rent covers the buying price of the asset. Tenants pay a deposit then clear the balance from rent saved or received. As soon as you pay the whole amount, the house title is transferred to you.
6. Construction Loans
They are given to individuals who already own pieces of land to enable them to build homes for themselves. They are also available for estate developments.
-Edited by Emomeri Maryanne