Doors are finally opening for civil servants to own homes with mortgage lenders offering them rock bottom deals.

Under a subsidised deal signed between the Government and Savings and Loan, a subsidiary of KCB, civil servants will access loans of up to five million shillings to buy homes.

Under the deal, Savings and Loan will charge a fixed five per cent interest on the loan per year over 18 years. The interest includes a management fee for running the Sh600 million being channelled by the Government through the National Housing Corporation.

That portends to be the sweetest mortgage deal in the market as market interest rates presently average between 11 and 17 per cent. It also lengthens the fixed mortgage rate loan tenure from 5 years offered by Standard Chartered Bank to 18 years. The rates will be charged on a reducing balance basis.

The package is limited to civil servants buying government houses floated by the ministry of housing for sale earlier this year. Another mortgage financier, Housing Finance, is set to sign a similar arrangement with the ministry later this month.

The deal is being financed under the Civil Servants Housing Scheme Fund (CVHSF). CVHSF has to date sold 1,049 housing units under its tenant purchase scheme. The ministry through National Housing Corporation is in the process of developing 526 housing units at Ngara.

An additional 22 housing units are also being developed in Kileleshwa for high income civil servants.

Speaking at the signing ceremony between the ministry and Kenya Commercial Bank, Housing minister Soita Shitanda asked employers to facilitate home ownership for their employees.

Only civil servants serving under the Public Service commission, excluding parastatals and other government agencies will be covered by the agreement. The loan will cover 90 per cent of the value of the house.

It is the first bold move by the ministry to address housing concerns of civil servants.

It is also the first time that the government is outsourcing mortgage administration services.

Martin Odour-Otieno, the managing director of Kenya Commercial Bank, said the interest rate was pegged at five per cent after the government agreed to subsidize some costs.

"We have waived most of the internal costs and bank charges to make the facility attractive to more civil servants who will now only be required to meet the costs of external parties," said Mr Oduor-Otieno.

The event follows a recent agreement to construct more houses for civil servants in the low and medium income category.

The State through the Ministry of Housing signed a Sh3.7 billion deal with an American company-Lemna International- to construct 1,500 two and three bedroom apartments in Shauri Moyo estate on a turnkey basis.

Construction is set to begin in the next two months and a second phase will see the construction of another 6,000 houses.

Civil servants will initially be given priority in buying the houses but the general public will also be considered.

Built in the '50s as one of the classiest areas to live in Nairobi, the stretch between Makongeni and Buru Buru Estates in Eastlands has for a long time been characterised by dilapidated houses.

It has been downgraded over the years as a result overpopulation and mismanagement to a point where it is an eyesore.

Property experts have in the recent past called for investment in the land to address the urban housing shortage and tame the growth of slums.

Property analysts say that, the deal between the ministry and S&L is catching up among major companies with housing benefits to its employers.

In the ministry's case it aimed at cashing in on house allowances of civil servants with an advantage of owning a house in the end instead of paying rent as opposed to the current setting where civil servants retire back to their rural homes, albeit with pension to look at.

The move has also been interpreted as an attempt to boost revenue for mortgage firms after property business was severely affected by the post election violence with a number of property firms finding it harder to move units.