If building a home, an apartment, or a commercial building is top of your 2023 goals, you might be wondering where to get the money for construction. You probably don’t want to join the ranks of people who’ve run out of cash while in the middle of building their dream home.
And if your construction project has stalled because of financial constraints, all hope is not lost. You can still recover and get freed from the shackles of paying rent.
Here are some financial options that might help you complete your dream house.
Savings
For employed people looking to embark on construction projects, savings is the best option.
According to Christine Gathoni (a financial advisor), it’s best to have at least 40% of your construction budget upfront. Therefore, if your budget is 5 million Kenya Shillings, have at least 200,000 Kenya SHillings in your savings account. This money will be enough to kickstart your project and give you time to look for alternative sources of cash.
On that note, you’ll get better returns if you save your money in a Sacco compared to a bank.
Investments from SACCOs and Microfinance Institutions
Another financial option is investing in SACCOs and other microfinance institutions.
Most SACCOs have better interest rates than banks, and they can loan you up to 10 times your savings to kickstart your mjengo project. Also, their repayment periods are not as strict as banks.
If you are employed, saving money in a reputable SACCO is a good start to achieving your dream of owning a home.
Five most critical rules to follow when building your house in Kenya
Chamas
A chama is a group of people who contribute money regularly towards a particular goal.
Nowadays, many banks and microfinance institutions in Kenya invite individuals to contribute to a pool of funds. Over time, these institutions can advance you money once they see a history of consistency and seriousness in your chama.
You can invest the money as a chama in projects such as gated communities.
Rent-to-Own Option
Rent-to-own is a new concept in the Kenyan market. Here, you buy an existing home rather than building your own from scratch.
The company will ask you to pay a down payment, usually 20% of the value of the house. The rest of the money is split over a certain period, say ss20 years. Once you clear the whole amount, you assume full ownership of the house.
You can do your due diligence about companies that have the best rent-to-own deals in Kenya.
Loans
If the worst comes to the worst, you can take a construction loan to complete your project. Some banks cover 100% of the construction costs if you own the plot.
However, the interest rates can get very high if you exceed the repayment period. Therefore, you should do your due diligence about which banks offer the best deals to help you complete your construction project.
Conclusion
A journey of a thousand miles begins with one step. Depending on your situation, you can finance your mjengo project through savings, joining a chama, step-by-step development, or joining a sacco. Alternatively, you can take a loan.
If you need financing for your mjengo project, apply HERE.