# 15.	Civil Servants (Housing Scheme Fund) Regulations, 2004

Quick Link: <https://new.kenyalaw.org/akn/ke/act/ln/2004/98/eng@2022-12-31>

·         These Regulations came into force in September 2004 vide Legal Notice No. 94 of 2004. One of the objects of the Regulations is to establish and operationalize a Fund known as the Civil Servant Housing Scheme Fund.

·         Before the establishment of the Fund, and particularly before July 2001, the Government of Kenya provided subsidized housing to its employers (civil servants) through the provision of government-owned or government-leased housing, or payment of house allowance for those not provided housing by the government. This gave rise to challenges around equity with only about 12% benefiting from the scheme while the rest were subject to private market forces. Accordingly, in July 2001, the government began implementing a new housing policy for civil servants whereby the government began moving away from the responsibility of directly providing housing save for essential civil servants, rather encouraging civil servants to own their own homes. It is this that provided the background for the establishment of the civil servants housing scheme fund.

·         The purpose of this Fund under Regulation 4 is to provide loan facilities to civil servants for constructing or purchasing a residential house and to develop housing units for sale and for rental by civil servants.

·         Regulation 6 establishes a Scheme Management Committee for the Fund which determines and regulates interest payable by loanees; approves all housing development and financing proposals; develops criteria for beneficiaries of the Fund; among other functions.

·         However, the composition of the Scheme Management Committee is top heavy with members comprising of 5 Principal Secretaries, the Attorney General and one officer administering the Fund. There is need for more broad-based representation even among individual civil servants to ensure even the actual and potential beneficiaries of the housing units are represented.

·         Regulation 7 provides that a loan granted can only be solely utilised for the purchase of a residential house for occupation by the applicant; improvement of a residential house occupied by an applicant; development of a residential house for occupation by the applicant; purchase of land and development of a residential house for occupation by the applicant; and equity release for improvement or development of a residential property. Regulation 7(2) further provides that a loan for developing a house can only be granted to a civil servant who is in possession of a title deed to land on which the development is to be carried out. The exclusion of civil servants who do not have land on which to put up a residential property from the loan scheme for developing a residential house only exacerbates the problem as those are the persons in most need of financial support.

·         Regulation 7 further provides that eligible civil servants are those in confirmed employment of more than 12 months contract with the Cabinet Secretary granted the powers to vary the maximum amount of funds that may be loaned.

·         Under regulation 8, the loan funds are only disbursed in phases with the first phase set at 25% of the cost of construction subject to the cost of construction not exceeding the maximum funding possible, or, twice the open market value of the land on which the house is to be built, whichever is lesser. Subsequent disbursements are made based on the rate of completion of the various phases of the development as certified by a registered valuer.

·         In addition, under Regulation 9(3B), the loan for development of a house is pegged at 90% of the value of the property but shall not exceed the maximum loan amount set.

·         Regulation 11 and 12 provide that the interest rate on the loan is to be at a minimum of 3% and a maximum of 5% per annum on a monthly reducing balance or such other rate as determined by the Committee, with the loan being paid in 20 years or upon the person attaining 60 years (whichever is earlier).

·         Under regulation 15, a default on the loan for a period of 3 consecutive months entitles the Committee to repossess the property and sell the same to another civil servant.

·         Regulation 17A now provides that the Fund may enter viable financing or development partnership with a person/entity for the purpose of achieving the objects of the Fund.

·         Regulation 18 impliedly allows the Committee to appoint a tenant purchase institution or a mortgage finance company to administer the Fund on its behalf.

·         At present, loans provided under the Civil Servants Housing Scheme Fund range between Ksh. 4-10 million based on seniority and affordability of the employee. The interest rate is currently pegged at 5% per annum on a monthly reducing balance with applicants being facilitated up to a maximum of 90% of the price upon making a down payment of 10%.\[1]Statistics indicate that the Civil Servants Housing Scheme Fund gave Ksh 6.2 billion in loans to purchase or build homes to 1, 321 civil servants as of 30 June 2021.\[2]

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\[1] <https://housingandurban.go.ke/the-civil-servants-housing-scheme-fund-cshsf/>

\[2] <https://www.businessdailyafrica.com/bd/economy/civil-servants-take-sh6-2bn-home-loans-in-state-scheme-3909014>
