In many African countries, home ownership is unattainable because it remains unaffordable in comparison to residents’ income levels. Kenya has attempted to grow its mortgage market with little success, due to a lack of long-term capital, high interest rates, and low income levels – meaning there is a need to explore alternative pathways to homeownership.
Tenant Purchase Schemes (TPS) are a lest-to-own financing model representing one of the alternative options to reach home ownership. The buyer makes a down-payment and subsequent monthly payments, and after paying the full sale price, which generally takes 10-15 years with fixed interest rates, the buyer becomes the owner. Though this is similar to a rent-to-own model, TPS is slightly different in structure and ownership, and have been part of Kenya’s housing landscape for decades. There remain questions about the financial sustainability of TPS, as credit and interest rate risks remain with the developer, but in a market with few other accessible housing finance tools, TPS represents a possible, if not perfect, alternative.
Source:
Gitonga, A.M. (2023) Overview of Tenant Purchase Schemes in Kenya. Center for Affordable Housing Finance in Africa.
Link: https://housingfinanceafrica.org/documents/overview-of-tenant-purchase-schemes-in-kenya/