From left: NCBA Group MD John Gachora, KCB Group CEO Joshua Oigara and Kenya Bankers Association CEO Habil Olaka during the launch of a mobile loan product in 2019. FILE PHOTO | NMG It is estimated that over $37.1 billion worth of securities held by big banks are tied in the real estate amid reports that the value of some properties have dropped.
Kenyan borrowers with collateral whose value has depreciated will now be required to provide additional security as banks move to tighten lending terms.
Borrowers will be required to provide additional security in the event the value of collateral on loans, mainly land and building, depreciate during the loan period to cover for default
Kenyan borrowers with collateral whose value has depreciated will now be required to provide additional security as banks move to tighten lending terms.
It is estimated that over $37.1 billion worth of securities held by big banks are tied in the real estate amid reports that the value of some properties have dropped.
The EastAfrican has learnt that as part of the precautionary measures the lenders will demand additional security from borrowers in the course of the loan repayment period when the value of the existing collateral drops to a level below that of the loan amount.
The latest tightening of the lending standards comes as it emerged that the country’s top lenders are heavily exposed to the real estate sector by holding collaterals estimated at over $37.1 billion, raising fears of massive losses should there be a property bubble in the economy.
According to the Kenya Bankers Association (KBA), lenders will carry out frequent revaluations of charged properties and in the event that the value of the property is found to be below the value of the loan, the borrower will be required to provide additional security.
“Obviously there is always a risk in terms of over-concentration in a segment and it is not just property but any segment. When there is over-concentration in a segment and when there is a movement in the price you feel it almost immediately so properties are no exception,” the association’s chief executive Habil Olaka told TheEastAfrican in an interview last week.
“You need to get the valuer to revalue the collateral to ensure that you are still within the required parameters. If you find that you are below some of the requirements it will mean that you require additional collateral from […]