THE IMPACT OF MORTGAGE FINANCING OF REAL ESTATE DEVELOPMENT

ON CIVIL SERVANT IN UASIN GISHU COUNTY.

NGUTUKU EDWARD WANJALA

(BCMC01/2274/2019)

A RESEARCH PROPOSAL SUBMITTED TO THE SCHOOL OF BUSINESS AND

ECONOMICS IN PARTIAL FULFILLMENT FOR THE AWARD OF BACHELOR OF
COMERCE FOR THE COOPERATIVE UNIVERSITY OF KENYA.

APRIL 2025
 DECLARATION

Declaration by the student

I declare that this research project is my original work and has never been presented for the
award of a university degree in any other university or any other award.

NGUTUKU EDWARD WANJALA

BCMC01/2274/2019

SIGNATURE…………………………. . DATE………………………

Declaration by the Supervisor

I confirm that the work reported in this proposal was carried out by the candidate under my
supervision and has been submitted with my approval as the University supervisor.

SIGNATURE………………… DATE…………………

MR. MOSONGO

SCHOOL OF BUSINESS AND ECONOMICS

DEPARTMENT OF ECONOMICS AND ENTREPRENEURSHIP,

THE COOPERATIVE UNIVERSITY OF KENYA

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 DEDICATION

This research proposal is sincerely dedicated to my late Dad, Mom and my siblings, for the
unquantifiable support they give to me.

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 ACKNOWLEDGEMENT

I acknowledge that this proposal has been made possible by contributions from various individuals
and without their endearing support it could have not been possible to bring the research to fruition.
While it is impossible to name each of the individuals by name, it is my pleasure to acknowledge
any individual who contributed to the completion of this study either indirectly or directly. May
God bless you all? First, I am very thankful to God for His non-ending supplication and mercies.
Secondly, I would like to express my sincere gratitude to my research supervisor Mr. Mosongo for
providing his invaluable guidance, comments and suggestions throughout the course of the
proposal. Lastly, I sincerely thank my friends and families for their moral and financial support.

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 TABLE OF CONTENTS

DECLARATION............................................................................................................................................ ii
DEDICATION ............................................................................................................................................. iii
ACKNOWLEDGEMENT .............................................................................................................................. iv
TABLE OF CONTENTS ................................................................................................................................. v
LIST OF ABBREVIATIONS ........................................................................................................................... ix
ABSTRACT .................................................................................................................................................. x
CHAPTER ONE ............................................................................................................................................ 1
INTRODUCTION ......................................................................................................................................... 1
1.1. Background of the Study ................................................................................................................. 1
1.1.1 Global Perspective .................................................................................................................... 1
1.1.2. Regional Perspective ................................................................................................................ 2
1.1.3. Local Perspective...................................................................................................................... 3
1.2 Statement of the Problem................................................................................................................ 4
1.3 Research Objectives ......................................................................................................................... 5
1.3.1 General Objective ..................................................................................................................... 5
1.3.2 Specific Objective ...................................................................................................................... 5
1.4 Hypothesis/Research Question ........................................................................................................ 5
1.5 Significance of the Study .................................................................................................................. 5
1.6 Scope of the Study ........................................................................................................................... 6
CHAPTER TWO ........................................................................................................................................... 8
LITERATURE REVIEW.................................................................................................................................. 8
2.1 INTRODUCTION................................................................................................................................ 8
2.2 THEORETICAL REVIEW...................................................................................................................... 8
2.2.1.1 Financial Intermediation Theory ............................................................................................ 8
2.2.1.2 Demand and Supply Theory of Housing.................................................................................. 9
2.2.1.3 Life Cycle Hypothesis .............................................................................................................. 9
2.3. EMPIRICAL REVIEW ....................................................................................................................... 10
2.3.1. Mortgage interest rates and real estate development ........................................................... 10
2.3.2. Loan terms and conditions and real estate development ....................................................... 11
2.3.3. Mortgage accessibility and real estate development ............................................................. 12
2.4 CONCEPTUAL FRAMEWORK ........................................................................................................... 13
Figure 2.1 Conceptual Framework ....................................................................................................... 14

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 2.5 Research Gap ................................................................................................................................. 15
CHAPTER THREE ...................................................................................................................................... 16
RESEARCH METHODOLOGY ..................................................................................................................... 16
3.2 Research Design ............................................................................................................................. 16
3.3 Target Population .......................................................................................................................... 17
Table 3.1: Target Population Breakdown ............................................................................................. 17
3.3.1 Sample Size ............................................................................................................................. 17
3.4 Sampling Design ............................................................................................................................. 18
3.5 Data Collection............................................................................................................................... 19
3.5.1 Instrument of Data Collection ..................................................................................................... 19
3.6 Ethical Considerations.................................................................................................................... 19
3.7 Data Collection Procedures ............................................................................................................ 19
REFERENCES ............................................................................................................................................ 20
APPENDICES ............................................................................................................................................ 23
APPENDIX : QUESTIONNAIRE ............................................................................................................... 23

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LIST OF TABLES
Table 3.1…. target population breakdown……page 17

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Definition of Key Terms
Mortgage Financing: This refers to a loan facility provided by financial institutions to individuals
or organizations to purchase or develop real estate properties, with the property itself serving as
collateral. In this study, it focuses on housing loans accessible to civil servants for real estate
development purposes.

Real Estate Development: Real estate development involves the process of purchasing land,
financing construction, and building residential or commercial properties. In the context of this
study, it specifically refers to the acquisition or construction of residential properties by civil
servants through mortgage financing.

Mortgage Interest Rates: These are the charges expressed as a percentage of the loan amount
that borrowers must pay to lenders for using the mortgage facility. This study explores how varying
interest rates affect the ability of civil servants to finance property development.

Loan Terms and Conditions: These refer to the specific details and agreements set by lending
institutions regarding the repayment period, loan amount, collateral requirements, and penalties.
This study examines how the structure and strictness of these terms influence civil servants’
participation in real estate projects.

Mortgage Accessibility: Mortgage accessibility refers to the ease with which civil servants can
obtain mortgage financing. It includes factors such as loan approval processes, creditworthiness
requirements, income thresholds, and availability of mortgage products.

Civil Servants: These are employees of the national or county governments who are engaged in
various public service roles. For this study, civil servants in Uasin Gishu County are the primary
respondents, including those working in administrative, technical, and support positions.

Uasin Gishu County: This is one of the 47 counties in Kenya, located in the Rift Valley region.
It is characterized by a growing urban population, especially in Eldoret town, and is the
geographical focus of this research.

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 LIST OF ABBREVIATIONS

MOR - Mortgage Originating Rate

PPI - Producer Price Index

SPSS - Statistical Package for the Social Sciences

CCI - Consumer Confidence Index

IRS - Interest Rate Spread

APR - Annual Percentage Rate

B2B - Business-to-Business

B2C - Business-to-Consumer

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 ABSTRACT

This research study will examine the impact of mortgage financing on real estate development
among civil servants in Uasin Gishu County. The specific objectives of the study will include: to
examine the effect of mortgage interest rates on real estate development among civil servants; to
assess how loan terms and conditions influence real estate development for civil servants; and to
evaluate the impact of mortgage accessibility on real estate development among civil servants. The
scope of this study will be limited to civil servants residing in Uasin Gishu County, specifically in
Eldoret, the county's administrative center, with a focus on how mortgage-related factors
contribute to real estate development within this demographic. The study will be grounded in three
key theories: The Life Cycle Hypothesis, the Theory of Planned Behavior, and Agency Theory.
These theories will guide the understanding of financial decision-making behaviors, attitudes
toward real estate investment, and the relationship between mortgage lenders and borrowers. The
research will adopt a descriptive research design, allowing for a comprehensive exploration of the
variables without manipulating them. The target population will consist of civil servants in Uasin
Gishu County, with a specific focus on those involved in real estate development. A sample size
of 80 respondents will be selected using a stratified random sampling technique to ensure a
representative cross-section of the population. Data will be collected through structured
questionnaires containing both closed-ended and Likert scale questions to capture the respondents’
views on the various mortgage financing factors affecting real estate development. Data will be
analyzed using descriptive statistics and multiple linear regression analysis. Descriptive statistics
will be used to summarize and present the general trends in the data, while multiple regression will
assess the strength of relationships between mortgage interest rates, loan terms, mortgage
accessibility, and real estate development. The findings will be presented in the form of tables,
graphs, and charts, providing a clear visualization of the effects of mortgage financing on real
estate development among civil servants in Uasin Gishu County.

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 CHAPTER ONE

INTRODUCTION

1.1. Background of the Study

Mortgage financing has long served as a pivotal mechanism in facilitating homeownership and
real estate development across the globe. Originating in ancient civilizations, the concept evolved
over centuries to become institutionalized in the modern financial sector, particularly after the 20th
century when financial institutions began formalizing long-term lending for property acquisition.
In many economies, mortgage financing has enabled individuals and investors to access significant
capital for the development or acquisition of residential and commercial properties, contributing
to urban development and improved living standards (Kamau & Karanja, 2021). In Africa, the
development of mortgage markets has been gradual, facing challenges such as high interest rates,
limited access to credit, and underdeveloped legal frameworks, yet showing progressive growth
especially in urbanizing regions (Makori & Ong’olo, 2022).

In Kenya, mortgage financing has emerged as a critical tool in addressing the national housing
deficit, which is estimated at over 200,000 units annually (Centre for Affordable Housing Finance
in Africa [CAHF], 2021). The Kenyan government, through the Kenya Mortgage Refinance
Company (KMRC), has introduced various initiatives to increase affordability and accessibility of
mortgage products, especially for the formal sector, including civil servants. These initiatives are
aimed at bridging the financing gap and encouraging investment in real estate development.
Despite such efforts, mortgage uptake remains relatively low due to stringent qualification criteria,
limited income levels, and high collateral demands. For civil servants, access to mortgage
financing is particularly significant as it can offer a pathway to home ownership and improved
living conditions, enhancing their economic stability and productivity (Mwangi & Kariuki, 2020).

1.1.1 Global Perspective

Globally, mortgage financing plays a central role in real estate development and the promotion of
home ownership. In developed economies such as Germany, the mortgage market is highly
regulated yet remarkably efficient, offering long-term loans with favorable interest rates.
Germany’s housing finance system is characterized by the use of covered bonds (Pfandbriefe),
stable banking institutions, and strong borrower protections. These structures have supported

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widespread housing accessibility, ensuring that both middle- and low-income earners, including
public servants, can access quality housing through manageable mortgage schemes (Weber &
Gerlowski, 2020). The country also benefits from public housing programs and subsidies aimed at
supporting civil servants and other vulnerable groups to acquire homes through structured
financing models.

Moreover, Germany emphasizes financial prudence and risk assessment before mortgage issuance,
helping to minimize defaults and protect both lenders and borrowers. As a result, home ownership
in Germany remains relatively stable and contributes significantly to economic growth and
personal welfare. Although home ownership rates are not the highest in Europe, the German model
is praised for its balance between rental and ownership options and its focus on long-term
affordability and sustainability in housing development (Voigtländer, 2021). These global
experiences offer valuable lessons for developing countries like Kenya in designing inclusive and
sustainable mortgage financing structures for civil servants.

1.1.2. Regional Perspective

In Africa, countries like Egypt have made significant strides in mortgage financing to stimulate
real estate development and improve housing access. Egypt’s government has implemented
several mortgage finance reforms, such as the establishment of the Mortgage Finance Authority
(MFA) and the Mortgage Finance Fund (MFF), to support low- and middle-income earners in
accessing affordable housing credit. These reforms have been instrumental in developing a
secondary mortgage market, enhancing liquidity in the sector, and encouraging private sector
participation in housing finance (Abdelhalim & Elsayed, 2021). The government also offers
subsidies and interest rate buy-downs to promote affordability for civil servants and other formal
sector employees.

Despite notable progress, Egypt still faces challenges such as inflationary pressures, limited
mortgage awareness, and bureaucratic hurdles that affect access to mortgage loans. Nonetheless,
the country’s commitment to housing reforms and investments in mortgage infrastructure
continues to shape the regional housing finance landscape. The lessons from Egypt highlight the
importance of targeted government interventions, legal reforms, and public-private partnerships in
strengthening mortgage financing systems across Africa (Younes & El-Zayat, 2022). For countries

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like Kenya, borrowing from Egypt’s experience could support efforts in improving real estate
development through accessible mortgage systems tailored for public servants.

1.1.3. Local Perspective

In Kenya, mortgage financing has gained increased attention as a critical instrument in addressing
the housing deficit and promoting home ownership among citizens, particularly civil servants. The
government has prioritized the housing agenda under the Big Four Agenda, which includes
affordable housing as a key pillar. Institutions such as the Kenya Mortgage Refinance Company
(KMRC) have been established to provide long-term funding to primary mortgage lenders, thereby
improving access to affordable housing loans (CAHF, 2021). These efforts are designed to target
the formal sector, including civil servants who often have stable income streams but face
challenges accessing traditional home financing due to high interest rates and collateral demands.

However, despite these policy interventions, Kenya’s mortgage market remains underdeveloped,
with fewer than 30,000 active mortgage accounts in a population of over 50 million (CBK, 2022).
The high cost of borrowing, limited public awareness, and weak land registration systems are some
of the persistent barriers limiting the uptake of mortgage financing. For civil servants, these
challenges are compounded by bureaucratic loan application processes and delayed disbursements,
which slow down their participation in real estate ownership. Nevertheless, counties like Uasin
Gishu, with a growing urban population and a significant number of civil servants, offer great
potential for mortgage-driven real estate development. Understanding the impact of mortgage
financing in such counties is key to shaping effective policy and expanding housing access to
public sector employees.

Uasin Gishu County, with Eldoret as its administrative and economic hub, has witnessed rapid
urbanization and increasing demand for housing. The county’s strategic location, economic
growth, and rising population have stimulated real estate activities, with civil servants constituting
a considerable portion of the middle-income population seeking home ownership. However, the
extent to which mortgage financing has influenced real estate development and improved housing
accessibility for civil servants in this region remains under-researched. Understanding this
relationship is essential in informing policy, guiding investment decisions, and enhancing access
to decent housing among public sector employees in Uasin Gishu County.

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1.2 Statement of the Problem

Access to affordable housing remains a major challenge in Kenya, particularly among civil
servants, who often rely on mortgage financing to achieve homeownership. Despite government
initiatives such as the establishment of the Kenya Mortgage Refinance Company (KMRC) to
improve long-term lending and reduce mortgage costs, uptake remains critically low. According
to the Central Bank of Kenya (2022), there were only 26,723 active mortgage accounts in Kenya
by the end of 2021, representing a negligible fraction of the population, despite a formal workforce
exceeding 2.9 million people. Civil servants, who make up a large proportion of this workforce,
continue to face difficulties in accessing suitable mortgage products due to high interest rates,
stringent loan requirements, and bureaucratic delays, which hinder their ability to participate in
real estate development and homeownership.

Previous studies have explored various dimensions of mortgage financing and housing
development. For example, Mwangi and Kariuki (2020) examined the influence of mortgage
financing on employee welfare among public servants in Nairobi but did not investigate the link
between mortgage accessibility and actual real estate development patterns in devolved units such
as counties. Similarly, Makori and Ong’olo (2022) investigated challenges in mortgage uptake but
did not address the specific impact on housing access and ownership among civil servants as a
distinct group. These studies provide valuable insights but fall short of contextualizing the problem
in semi-urban or rapidly urbanizing areas like Uasin Gishu County, where demand for housing is
rising due to economic growth and rural-urban migration.

The key variables in this study are mortgage financing (independent variable) and real estate
development among civil servants (dependent variable). This research seeks to bridge the gap by
evaluating how mortgage financing influences real estate development specifically for civil
servants in Uasin Gishu County, considering factors such as affordability, accessibility, and loan
structures. Despite numerous housing development programs at the national and county levels,
there is insufficient empirical evidence to show whether civil servants in Uasin Gishu have
effectively benefited from available mortgage financing options to secure decent housing.

Given the growing population in Uasin Gishu estimated at over 1.1 million as of the 2019 census
(Kenya National Bureau of Statistics [KNBS], 2020) and the increase in urban housing demand in
Eldoret town and its environs, it is critical to assess how mortgage finance interventions translate

4
into tangible real estate development for public sector employees. Conducting this study will
inform policymakers, financial institutions, and real estate developers about the effectiveness of
current mortgage systems and identify necessary reforms to improve access and housing outcomes
for civil servants. This research is therefore timely and necessary to address both a practical
housing concern and a literature gap on mortgage financing at the county level in Kenya.

1.3 Research Objectives

1.3.1 General Objective

To determine the impact of mortgage financing of real estate development on civil servant in
Uasin Gishu county.

1.3.2 Specific Objective

i. To examine the effect of mortgage interest rates on real estate development among civil
servants in Uasin Gishu County.

ii. To assess how loan terms and conditions influence real estate development for civil
servants in Uasin Gishu County.

iii. To evaluate the impact of mortgage accessibility on real estate development among civil
servants in Uasin Gishu County.

1.4 Hypothesis/Research Question

i. What is the effect of mortgage interest rates on real estate development among civil
servants in Uasin Gishu County?

ii. How do loan terms and conditions influence real estate development for civil servants in
Uasin Gishu County?

iii. What is the impact of mortgage accessibility on real estate development among civil
servants in Uasin Gishu County?

1.5 Significance of the Study

This study is of great significance to the national government of Kenya as it provides critical
insights into how mortgage financing structures affect access to housing among civil servants—a
key segment of the public workforce. By examining factors such as interest rates, loan terms, and

5
accessibility, the findings will help policymakers evaluate the effectiveness of current housing
finance policies, including the implementation of the Kenya Mortgage Refinance Company
(KMRC) and the Affordable Housing Programme under the Big Four Agenda. The government
can use this evidence to redesign or fine-tune mortgage-related policies, enhance regulatory
frameworks, and implement targeted subsidies that promote sustainable home ownership and
improved living standards for public servants.

To Uasin Gishu County, the study is particularly relevant as it explores the local dynamics of real
estate development and civil servant housing within the devolved governance framework. The
county has witnessed increasing urbanization, particularly around Eldoret town, which has led to
a rising demand for affordable and quality housing. This research will provide the county
government with data-driven insights into how mortgage accessibility can be leveraged to improve
housing infrastructure and promote structured urban planning. Additionally, the findings can guide
local partnerships with housing cooperatives, financial institutions, and developers to craft county-
specific solutions for public employee housing challenges.

For future researchers, this study offers a valuable foundation and reference point for further
exploration in the fields of mortgage financing, public sector welfare, and housing development.
It identifies existing gaps in localized studies on mortgage finance, especially outside major cities
like Nairobi, and contributes to a growing body of knowledge on financial inclusion and urban
development in devolved units. Future scholars can build upon the findings to conduct comparative
studies across counties, assess long-term impacts of mortgage reforms, or analyze the
socioeconomic outcomes of increased civil servant homeownership.

1.6 Scope of the Study

This study focuses on Uasin Gishu County, located in the Rift Valley region of Kenya, with
specific attention to civil servants working within the county, including those stationed in Eldoret
and its surrounding sub-counties. The county is selected due to its rapid urbanization, growing
demand for housing, and a substantial population of government employees who are potential
beneficiaries of mortgage financing schemes. The study is confined to examining three main
independent variables: mortgage interest rates, loan terms and conditions, and mortgage
accessibility. These factors will be analyzed in relation to the dependent variable, which is real
estate development among civil servants. The research aims to understand how these elements of

6
mortgage financing influence the ability of civil servants to invest in or acquire residential
properties within the county.

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 CHAPTER TWO

LITERATURE REVIEW

2.1 INTRODUCTION

This chapter provides a review of the existing literatures on the impacts of mortgage financing of
real estate development on civil servants in Uasin Gishu County.

2.2 THEORETICAL REVIEW

2.2.1 Theoretical framework

2.2.1.1 Financial Intermediation Theory

Financial Intermediation Theory explains the role of financial institutions as banks and mortgage
providers as intermediaries between savers and borrowers. According to this theory, intermediaries
exist to reduce transaction costs, manage risk, and address information asymmetries in financial
markets (Scholtens & van Wensveen, 2003). In mortgage financing, financial institutions assess
borrowers' creditworthiness, pool savings, and allocate capital efficiently to support real estate
investments. The theory underscores the necessity of these institutions in facilitating access to
credit, particularly for long-term investments like housing.

This theory is directly relevant to the study as it provides the foundation for understanding the role
that financial institutions play in enabling civil servants in Uasin Gishu County to access mortgage
financing. Civil servants often rely on banks and mortgage finance companies to secure loans for
real estate development. The effectiveness of these institutions as intermediaries based on factors
such as interest rates, loan terms, and accessibility can significantly impact the level of real estate
development among this demographic.

Financial Intermediation Theory also highlights the importance of regulatory support in

maintaining trust and stability in the financial system. Institutions like the Central Bank of Kenya
and the Kenya Mortgage Refinance Company (KMRC) serve as facilitators and regulators to
ensure that mortgage financing is sustainable and inclusive. The theory implies that improved

8
intermediation mechanisms could enhance the ability of civil servants to secure housing, thereby
contributing to national goals like the Affordable Housing Programme.

2.2.1.2 Demand and Supply Theory of Housing

The Demand and Supply Theory of Housing explains that the housing market, like any other, is
driven by the forces of demand (buyers) and supply (sellers or developers). Demand for housing
is influenced by factors such as population growth, income levels, credit availability, and interest
rates. Conversely, the supply of housing is affected by construction costs, availability of land,
regulation, and financing options (Glaeser & Gyourko, 2005). When mortgage financing becomes
more accessible and affordable, the demand for real estate tends to increase, influencing the
development and expansion of housing infrastructure.

This theory is highly relevant to the current study because it helps explain how mortgage financing
influences real estate development among civil servants. Civil servants’ ability to participate in
housing markets depends on both their financial capacity and the availability of financing options.
When interest rates are favorable and mortgage conditions are accessible, demand increases, which
in turn stimulates housing supply. This dynamic is central to the investigation of how mortgage
financing impacts real estate development in Uasin Gishu County.

Moreover, the theory underscores that an imbalance between housing demand and supply can lead
to inflation in property prices or housing shortages. In regions like Uasin Gishu, where
urbanization and middle-class growth are accelerating, understanding the balance of these forces
is crucial for effective housing policy. Mortgage financing acts as a key instrument in aligning this
balance by empowering more civil servants to invest in homeownership and supporting developers
in meeting this demand.

2.2.1.3 Life Cycle Hypothesis

The Life Cycle Hypothesis, developed by Modigliani and Brumberg (1954), suggests that
individuals plan their consumption and savings behavior over their lifetime to achieve a stable
standard of living. The theory posits that individuals borrow when they are young (to invest in
things like education and housing), save during their working years, and dissave during retirement.
In the context of housing, this implies that individuals are likely to seek mortgage financing during

9
their prime working years such as when employed in civil service to acquire assets that offer long-
term security.

This theory is particularly relevant to the study because it explains why civil servants in Uasin
Gishu County are motivated to seek mortgage financing during their employment phase. The stable
income associated with public service makes them ideal candidates for long-term credit facilities.
Mortgage loans allow them to acquire homes that they can continue to live in during retirement,
thereby achieving a core objective of the life cycle hypothesis: long-term financial and housing
security.
Furthermore, the theory supports policy decisions aimed at enhancing access to credit for civil
servants, particularly those in their early to mid-career stages. By aligning mortgage products with
the income life cycles of civil servants, financial institutions and the government can create more
responsive and attractive loan terms. This approach can not only stimulate real estate development
but also promote financial planning and stability among public sector employees.

2.3. EMPIRICAL REVIEW

2.3.1. Mortgage interest rates and real estate development

In Belgium, mortgage interest rates have played a significant role in shaping housing development
trends. A study by De Roux and Van den Bosch (2022) found that lower interest rates directly
correlated with increased residential construction and higher mortgage uptake among middle-
income earners. The research highlighted that as the European Central Bank maintained low policy
rates, Belgian banks were able to offer fixed mortgage rates as low as 1.5% over 20-year periods,
thus stimulating home buying and real estate investments. The study also revealed that even slight
increases in interest rates (by 0.5%) resulted in noticeable declines in real estate transaction
volumes, indicating a sensitive relationship between interest rates and property development
activity. These findings underline the importance of affordable credit in promoting sustainable
housing growth.

In Rwanda, the government has made considerable efforts to make mortgage financing accessible,
yet interest rates remain a key barrier to widespread real estate development. According to
Ndayambaje and Habimana (2021), high mortgage interest rates ranging between 15% and 18%
discouraged public servants and low- to middle-income earners from taking up home loans. The

10
study, which focused on Kigali’s urban housing market, found that while demand for housing is
high among civil servants, especially teachers and healthcare workers, many were priced out due
to the cost of credit. The researchers recommended the introduction of subsidized loan programs
and interest rate caps to enable public sector workers to access affordable housing. This
underscores the broader trend in East Africa, where interest rates directly limit real estate
development among working-class populations.

In Kenya, empirical evidence also confirms a strong link between mortgage interest rates and real
estate development, particularly among civil servants. A study by Mutua and Kihoro (2020) on
mortgage uptake among public sector employees in Nairobi revealed that fluctuating and relatively
high interest rates ranging from 12% to 14% significantly reduced the willingness and ability of
civil servants to take up mortgage loans. The study noted that even with stable incomes, most
public workers preferred alternative housing options, such as SACCOs and housing cooperatives,
due to the lower cost of financing. Additionally, the study emphasized that for real estate
development to flourish among civil servants, there must be reforms to reduce lending rates and
enhance access to long-term, affordable mortgage facilities. These findings are critical in shaping
the understanding of housing finance behavior in counties like Uasin Gishu, where similar patterns
may be observed.

2.3.2. Loan terms and conditions and real estate development

In Australia, a study by Kim and Lewis (2021) found that favorable mortgage loan terms—
particularly longer repayment periods, low processing fees, and flexible repayment schedules—
played a crucial role in encouraging residential property development. The research indicated that
buyers were more likely to invest in property when mortgage products offered predictable and
stable terms, reducing the perceived risk of long-term indebtedness. In contrast, loans with hidden
fees or rigid repayment terms discouraged potential investors. The findings emphasize that
borrower-friendly loan structures not only increase homeownership rates but also stimulate
broader real estate market expansion.

In Ghana, Owusu and Asamoah (2020) explored the relationship between loan conditions and real
estate development among public sector workers in Accra. The study discovered that rigid loan
requirements, such as large down payments (often 20–30%) and short repayment windows (10–
15 years), limited many civil servants from accessing mortgages. Additionally, complex

11
documentation and inflexible default penalties further discouraged uptake. The study
recommended revising public housing finance schemes to offer more accessible and borrower-
centric loan conditions, thus encouraging public servants to engage in real estate investments. This
highlights the pressing need across African nations to make mortgage terms more inclusive.

In Kenya, research by Mwangi and Wanjohi (2022) on the effect of loan terms on home ownership
among civil servants revealed that many government employees avoided formal mortgage
institutions due to unfavorable conditions such as high insurance fees, collateral requirements, and
strict default clauses. The study found that civil servants in counties like Uasin Gishu often
preferred borrowing from SACCOs, which offered more lenient terms and longer repayment
periods. It concluded that unless mainstream mortgage lenders restructure their loan products to
suit the income cycles of civil servants, real estate development would remain restricted among
this key demographic.

2.3.3. Mortgage accessibility and real estate development

In Japan, Yamada and Kobayashi (2020) found that accessible mortgage schemes significantly
boosted real estate development, particularly through government-backed low-interest housing
programs. The study showed that simplified application procedures, reduced credit requirements,
and digitalized loan processing systems led to higher mortgage uptake among public sector
workers. Civil servants in urban areas were especially responsive to financing options that did not
require high down payments or extensive collateral. The authors concluded that improved
accessibility to mortgages increased both property ownership and construction of residential units
in mid-income zones.

In Tanzania, a study by Mwakalinga and Ndunguru (2021) examined mortgage accessibility and
its effect on real estate investment in Dar es Salaam. The researchers found that lack of awareness,
limited access to information, and concentration of mortgage services in urban areas restricted civil
servants from accessing home loans. Where mortgages were available, bureaucratic hurdles and
high eligibility thresholds discouraged applicants. The study called for improved financial literacy
and decentralization of mortgage services to expand real estate development opportunities for
public servants across different regions, especially in fast-growing counties and districts.

In Kenya, Wekesa and Musau (2019) conducted a study on mortgage accessibility among civil
servants and found that despite the existence of institutions like the Kenya Mortgage Refinance

12
Company (KMRC), many civil servants still struggled to access mortgage financing. Key barriers
included stringent qualification criteria, poor outreach, and low integration between civil service
payroll systems and financial institutions. The study emphasized that improved accessibility in
terms of both physical presence of mortgage providers and simplified eligibility was essential for
encouraging real estate development. The findings are especially relevant to counties like Uasin
Gishu where the housing demand is growing, but mortgage penetration remains low.

2.4 CONCEPTUAL FRAMEWORK

This framework analyzes how mortgage financing mechanisms interest rates, loan terms, and
accessibility shape real estate development outcomes for civil servants.

INDEPENDENT VARIABLE DEPENDENT VARIABLE

Mortgage Interest Rates

• Interest rate percentage
• Fixed vs. variable interest rate
• Government-subsidized
interest rates for civil servants

Real Estate Development

Loan Terms and Conditions • Number of residential units
• Loan tenure (e.g., 15 vs. 30 developed for civil servants
years) • Average property price in
• Down payment requirement civil servant-dominated
percentage areas
• Approval process speed • Homeownership rate among
civil servants

Mortgage Accessibility
• Income eligibility thresholds
• Credit score requirements
• Availability of civil servant-
specific mortgage products

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Figure 2.1 Conceptual Framework

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2.5 Research Gap

Despite the growing importance of mortgage financing in the real estate development sector,
particularly among civil servants, there is a notable gap in the literature concerning the specific
impacts of mortgage interest rates, loan terms and conditions, and mortgage accessibility on real
estate development within the context of Uasin Gishu County, Kenya. Existing studies have largely
focused on general housing finance trends or examined mortgage financing at a national level
without delving into the specific challenges faced by civil servants at the county level (Mutua &
Kihoro, 2020; Ndayambaje & Habimana, 2021). Furthermore, while there is some research on how
financial products influence real estate development, few studies have integrated a comprehensive
analysis of all three critical variables—interest rates, loan terms, and mortgage accessibility—as
they relate to the public sector in a specific region of Kenya.

In global and regional studies, such as those conducted in Belgium (De Roux & Van den Bosch,
2022) and Rwanda (Ndayambaje & Habimana, 2021), the role of favorable mortgage conditions
in enhancing real estate development is well established, but these studies do not specifically
address civil servants or contextualize the data within the unique socio-economic dynamics of
Uasin Gishu County. Moreover, while some research has been conducted on mortgage access in
Kenya (Wekesa & Musau, 2019), these studies often overlook the nuanced impact of loan terms
and interest rates specifically for civil servants. The gaps in literature leave significant questions
unanswered about how these factors contribute to the decision-making process of civil servants
when it comes to homeownership and real estate development.

This study seeks to bridge these gaps by focusing on Uasin Gishu County, where the specific
conditions of civil servants, including income levels, access to credit, and housing demand, differ
from the broader national trends. By examining how mortgage interest rates, loan terms and
conditions, and mortgage accessibility influence real estate development among civil servants, this
research will contribute valuable insights to both policymakers and financial institutions.
Additionally, it will offer a more localized understanding of the relationship between mortgage
financing and housing development, providing actionable recommendations for enhancing
mortgage accessibility for civil servants in the region.

15
 CHAPTER THREE

RESEARCH METHODOLOGY

3.1 Study area

The study will be conducted in Uasin Gishu County, focusing on the Eldoret Town area, which
is a rapidly growing urban center in the region. This region represents both the urban and semi-
urban dynamics of real estate development among civil servants. The research will benefit
residents of Eldoret and provide insights applicable to other similar towns in Kenya where civil
servants are engaged in real estate development.

3.2 Research Design

Research design refers to the framework that guides the collection and analysis of data in order to
address the research problem. According to Muaz (2013), research design is a detailed plan that
specifies how a study will be conducted. For this study, a descriptive research design will be
employed to examine the relationship between mortgage interest rates, loan terms and conditions,
and mortgage accessibility on real estate development. Descriptive research is an efficient, cost-
effective method for obtaining reliable information from the field and helps in the collection of
quantitative data through surveys or interviews. This design is ideal for presenting the current
situation as it exists, without manipulating the variables involved.

The study aims to analyze the impact of mortgage financing factors on real estate development.
The descriptive design allows for the detailed collection and presentation of data on the
experiences of civil servants in Uasin Gishu County, reflecting their challenges and opportunities
in accessing mortgage financing for real estate development.

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3.3 Target Population

The target population for this study comprises civil servants in Uasin Gishu County who are
involved in real estate development through mortgage financing. The total target population is
approximately 100 civil servants.

Table 3.1: Target Population Breakdown

Percentage of Total
Sector/Department Number of Civil Servants
Population

Education 25 25%

Health 20 20%

Administrative/Other 30 30%

Security 15 15%

Local Government & Planning 10 10%

Total 100 100%

This group who will be chosen based on their eligibility to access mortgage financing and their
active involvement in the real estate sector. According to the County's Housing Department (2023),
the number of civil servants interested in property development through mortgages has been
steadily increasing in recent years.

3.3.1 Sample Size

The sample size for this study will be determined using Yamane’s formula (1967) for sample size
determination, which ensures an accurate representation of the population. The formula is as
follows:

n=N1+N(e)2n = \frac{N}{1 + N(e)^2}n=1+N(e)2N

Where:

n is the sample size

N is the population size (100 civil servants)

17
e is the acceptable margin of error (0.05)

Applying the formula:

n=1001+100(0.05)2=80

n = \{100}{1 + 100(0.05)^2} = 80

n=1+100(0.05)2100=80

Therefore, a sample size of 80 civil servants will be selected for the study.

3.4 Sampling Design

Murigi (2014) defines sampling as the process of selecting a representative subset from a larger
population. To ensure the sample is representative, stratified random sampling will be used. This
method will divide the civil servants into different strata based on their department or role in the
civil service (e.g., education, health, administrative). The civil servants will then be randomly
selected from each stratum to form the study sample.

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3.5 Data Collection

Both primary and secondary data will be collected for this study. Primary data will be gathered
using questionnaires, which will be designed to capture information on the mortgage financing
process, interest rates, loan terms and conditions, and the accessibility of mortgages for civil
servants involved in real estate development. Secondary data will be sourced from published
reports, academic journals, and government documents that provide relevant background on
mortgage financing and real estate development trends in Kenya.

3.5.1 Instrument of Data Collection

Primary data for this study will be collected through a structured questionnaire, which will include
both closed-ended and Likert scale questions. The questionnaire will be organized into two
sections. Section A will gather demographic information from the respondents, such as their age,
education level, and years of service in the civil service. This section will help provide context for
understanding how personal characteristics may influence their responses. Section B will focus on
mortgage financing, specifically exploring aspects such as mortgage interest rates, loan conditions,
and factors that influence the accessibility of mortgages for real estate development. The closed-
ended questions will ensure that the data collected is consistent and easy to analyze, yielding
quantitative data that can be subjected to statistical analysis for more accurate interpretation and
conclusions.

3.6 Ethical Considerations

Ethical standards will be strictly adhered to in this study. Participation in the research will be
voluntary, and respondents will be informed about the purpose of the study, ensuring they can
make informed decisions about their participation. According to Owczarzak and Smith (2022),
ethical research practices require that confidentiality and anonymity be maintained throughout the
process. Personal information will not be disclosed, and all data will be securely stored for analysis.
Respondents will also have the right to withdraw from the study at any time without facing any
penalties.

3.7 Data Collection Procedures

Before actual data collection, the research instrument will be pretested in a selected group of civil
servants to identify any potential issues or ambiguities in the questionnaire. The pretest will be

19
conducted on 10 civil servants, and adjustments will be made to the instrument as necessary.
Following this, the final data collection will take place over a period of two weeks, with the
researcher administering the questionnaires to the sample group in Uasin Gishu County.

REFERENCES

Abdelhalim, H., & Elsayed, M. (2021). Mortgage financing in Egypt: Opportunities and
challenges. International Journal of Housing Markets and Analysis, 14(2), 157–174.
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B., & van Wensveen, D. (2003). The theory of financial intermediation: An essay on what it does
(not) explain. SUERF Studies, 2003/1.

CAHF. (2021). Housing finance in Africa: A review of some of Africa’s housing finance markets.
Centre for Affordable Housing Finance in Africa. https://housingfinanceafrica.org

CBK. (2022). Bank supervision annual report 2022. Central Bank of Kenya.
https://www.centralbank.go.ke

Centre for Affordable Housing Finance in Africa. (2021). Housing finance in Africa: A review of
some of Africa’s housing finance markets. https://housingfinanceafrica.org

De Roux, K., & Van den Bosch, T. (2022). Mortgage interest rates and housing development:
Evidence from Belgium’s middle-income market. European Journal of Housing
Economics, 19(3), 241–259.

Glaeser, E. L., & Gyourko, J. (2005). Urban decline and durable housing. Journal of Political
Economy, 113(2), 345–375.

Kamau, J., & Karanja, L. (2021). Mortgage financing and housing affordability in Kenya.
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Kim, Y., & Lewis, R. (2021). The role of loan terms in housing finance: Evidence from Australian
mortgage borrowers. International Journal of Housing Policy, 21(3), 298–312.

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Makori, A., & Ong’olo, D. (2022). Challenges and opportunities of mortgage finance in
developing economies: A case of Kenya. African Journal of Economics and Sustainable
Development, 3(1), 17–28.

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interpretation of cross-section data. In Post-Keynesian Economics, edited by Kenneth K.
Kurihara. New Brunswick, NJ: Rutgers University Press.

Mutua, J., & Kihoro, J. (2020). The effect of interest rates on mortgage uptake among public sector
employees in Nairobi County, Kenya. Journal of African Real Estate Research, 3(1), 33–
47.

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growth in Tanzania: A case of civil servants in Dar es Salaam. East African Journal of
Economics and Development Studies, 3(1), 95–109.

Mwangi, C., & Wanjohi, J. (2022). Loan terms and mortgage uptake among civil servants in
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Ndayambaje, J., & Habimana, F. (2021). High mortgage interest rates and their impact on real
estate development in Rwanda: A case study of Kigali. East African Journal of Finance
and Economics, 5(2), 89–102.

Owusu, A., & Asamoah, E. (2020). The impact of mortgage loan conditions on housing
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economies. Journal of Housing Economics, 51, 101745.

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Weber, J. A., & Gerlowski, D. A. (2020). The German mortgage system: An international
perspective. Real Estate Finance Journal, 36(3), 24–32.

Wekesa, F., & Musau, E. (2019). Mortgage accessibility and home ownership among civil servants
in Kenya. Kenya Journal of Housing Policy and Research, 5(2), 80–94.

Yamada, S., & Kobayashi, T. (2020). Mortgage accessibility and its effect on real estate
development in urban Japan. Journal of Housing and Urban Development, 8(4), 144–159.

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 APPENDICES

APPENDIX : QUESTIONNAIRE

This questionnaire is designed as part of a research study aimed at exploring the factors that
influence real estate development among civil servants in Uasin Gishu County. The study
specifically focuses on the role of mortgage interest rates, loan terms and conditions, and the
accessibility of mortgage financing in determining the extent to which civil servants engage in real
estate development. Your participation in this study is valuable, and your responses will provide
important insights that will contribute to understanding how financial factors affect real estate
investments among civil servants in the region

Section A: Demographic Information

Please provide the following personal information (tick the appropriate box or fill in the blanks):

1. Age:
o 18-30
o 31-40
o 41-50
o 51 and above
2. Education Level:
o Secondary School
o Certificate/Diploma
o Bachelor's Degree
o Master's Degree or Higher
3. Years of Service in the Civil Service:
o Less than 5 years
o 5-10 years
o 11-15 years
o 16 years and above

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SECTION B: MORTGAGE INTEREST RATES AND REAL ESTATE DEVELOPMENT

This section focuses on understanding how mortgage interest rates affect real estate development
among civil servants in Uasin Gishu County. Please rate your level of agreement with the following
statements using the scale: 1 = Strongly Disagree, 2 = Disagree, 3 = Neutral, 4 = Agree, 5 =
Strongly Agree

Statement 1 2 3 4 5

1. High mortgage interest rates discourage civil servants from

investing in real estate development.

2. The affordability of mortgages in terms of interest rates

influences civil servants’ decisions to invest in property.

3. Civil servants find it difficult to access affordable mortgage

financing due to high interest rates.

4. Mortgage interest rates have a significant impact on the

number of civil servants investing in real estate development.

5. Lower mortgage interest rates would increase the likelihood

of civil servants investing in real estate development.

6. Civil servants feel that mortgage interest rates are the

primary barrier to real estate development.

7. A reduction in mortgage interest rates would make real estate

development more accessible to civil servants.

8. The current mortgage interest rates are unaffordable for most

civil servants looking to invest in real estate.

9. There is a clear relationship between mortgage interest rates

and the growth of real estate development among civil servants.

10. Mortgage interest rates need to be adjusted for civil servants

to actively engage in real estate development.

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Section C: Loan Terms and Conditions and Real Estate Development

This section assesses how loan terms and conditions influence real estate development for civil
servants in Uasin Gishu County . Please rate your level of agreement with the following statements
using the scale: 1 = Strongly Disagree, 2 = Disagree, 3 = Neutral, 4 = Agree, 5 = Strongly Agree

Statement 1 2 3 4 5

1. Strict loan terms discourage civil servants from pursuing real estate
development projects.

2. Flexible loan repayment terms are crucial for civil servants to engage in
real estate development.

3. Civil servants find it difficult to meet the terms and conditions of

available mortgages for real estate.

4. The availability of favorable loan conditions increases the interest of

civil servants in real estate development.

5. Civil servants are more likely to invest in real estate if loan terms are
longer and more flexible.

6. The repayment period of mortgages is a significant factor in whether

civil servants decide to invest in real estate.

7. High down payments required by mortgage lenders make it difficult for

civil servants to invest in real estate.

8. Loan conditions such as collateral requirements limit the ability of civil

servants to invest in real estate.

9. Mortgage loan terms are better suited for middle and upper-income civil
servants, excluding others from real estate development.

10. Lenders should revise the terms and conditions of mortgages to make
real estate development more accessible to civil servants.

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Section D: Mortgage Accessibility and Real Estate Development

This section evaluates how mortgage accessibility affects real estate development among civil
servants in Uasin Gishu County. Please rate your level of agreement with the following statements
using the scale: 1 = Strongly Disagree, 2 = Disagree, 3 = Neutral, 4 = Agree, 5 = Strongly Agree

Statement 1 2 3 4 5

1. Civil servants have limited access to mortgage financing for real estate
development.

2. The process of applying for a mortgage is too complex for most civil
servants.

3. Mortgage lenders have strict criteria that limit civil servants' access to
financing.

4. There is a lack of information about available mortgage products for

civil servants interested in real estate.

5. Civil servants find it challenging to qualify for mortgage financing due

to their income levels.

6. Increased availability of mortgage financing would encourage more civil

servants to invest in real estate development.

7. There is a need for specialized mortgage products tailored for civil

servants to enhance accessibility.

8. Civil servants are more likely to invest in real estate if mortgage

products are easily accessible.

9. Access to mortgage financing is a key determinant in whether civil

servants engage in real estate development.

10. Reducing barriers to mortgage access will significantly increase real

estate development among civil servants.

Thank you for your participation

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