Here Are Existing Measures Meant To Ease Housing For Owners & Developers In Kenya

Kenya’s housing sector is largely characterized by deteriorating housing conditions countrywide arising from a demand that far outpaces supply, particularly in urban areas. According to the National Housing Corporation (NHC), Kenya has a cumulative housing deficit is growing by 200,000 units per year driven mainly by rapid population growth of 2.2% p.a. and high urbanization rate, Supply, on the other hand, has been constrained mainly by the high construction costs, high costs of land in urban areas as well as high cost of capital, with the Ministry of Housing in Kenya estimating the total annual supply to be at 50,000 units.

Notably, the Ministry indicates that 83.0% of the existing housing supply is for the high income and upper-middle-income segments, with only 15.0% for the lower-middle and 2.0% for the low-income population. In short, while 74.4% of Kenya’s working population requires affordable housing, only 17.0% of housing supply goes into serving the low to the lower-middle-income segment. This shortage in housing has manifested itself through the proliferation of slums and informal settlements in urban areas and poor quality housing in rural areas.

Owing to these housing dynamics and factors, the housing agenda under the government’s big four agendas was birthed in 2017. The government aims to deliver 500,000 homes by 2022 at a price range of Ksh 600,000 and 3Million.

                                                                    House Owners

The target beneficiaries for the units are Kenyans who are unable to access long-term housing finance. This is as most local banks have products for households that earn above Ksh 150,000 per month.

As a low middle-income country, Kenya’s largest challenge has been access to finance. The government has therefore set new measures other than those set by previous regimes;

Affordable Housing Relief: The Income Tax Act was amended in 2018 to allow 15.0% tax relief up to a maximum of Kshs 108,000 p.a., or Kshs 9,000 p.m., to affordable home buyers,

Stamp Duty Act: Amended in 2018, the Act allows for the exemption of first-time homebuyers under the affordable housing scheme from paying the Stamp Duty Tax, which is normally set at 2.0% – 4.0% of the property value depending on location, and,

Kenya Mortgage Refinancing Company: The facility was set up with the intention of enhancing mortgage affordability in Kenya by enabling long-term loans at attractive market rates through the provision of affordable long-term funding and capital market access to primary mortgage lenders such as banks and financial co-operatives.

                                                                   House Developers

The government has also gone ahead to set measures to help ease construction costs for developers;

• 50% corporate tax break from 30% to 15% for investors who put up 100 and above affordable housing units,
• Scrapping off, of the NEMA and NCA levies, which used to be 0.1% and 0.05% of the project costs, respectively,
• Exemption of VAT for supplies imported or purchased for direct and exclusive use in the construction of affordable houses by licensed Special Economic Zones (SEZ). Developers will also need (i) a recommendation from the Cabinet Secretary for Housing, and (ii) a minimum of 5,000 units to qualify,
• Exemption of companies implementing projects under the affordable housing scheme from the application of thin capitalization rules,
• Exemption of the transfer of a house constructed under the affordable housing scheme from the developer to the National Housing Corporation from Stamp Duty,
• Reduction of Import Declaration Fee (IDF) on inputs for the construction of houses under the affordable housing scheme approved by the CS Finance from 2% to 1.5%, and,
• Under the Nairobi City County Sessional Paper Number 1 of 2018, waiving of building fees for all affordable housing projects in Nairobi.