Ten incentives offered under cheap housing scheme

By Lewis Njoka
Tuesday, February 11th, 2020
Housing. Photo/Courtesy

Owning a house is one of the dreams of every Kenyan and the government is trying to help its citizens achieve this through provision of affordable homes. Here are incentives aimed at attracting property developers and home buyers into investing into the affordable housing project

1. Corporate tax reduction 

The government has reduced corporate tax for property developers who build a minimum of 100 low-cost units under the affordable housing programme by half, from 30 per cent to 15 per cent.

2. Kenya Mortgage Refinance Company 

In collaboration with private investors, the government has established KMRC, which will lend cash to banks and Saccos to offer affordable mortgages to low income earners.

The lender will reduce mortgage interest rates from an average of 13.5 per cent to about nine per cent.

3. Scrapping of stamp duty  

First time home buyers, under the affordable housing scheme, will no longer be required to pay stamp duty which ranges between two and four per cent of total cost of the house.

4. Critical infrastructure  

Bulk infrastructure to projects sites will be prioritised by relevant ministries, departments and government agencies.

The State has pledged to fast track the installation of critical infrastructure such as sewer lines, water supply, power, roads and drainage in areas where investors have proposed to build low cost housing estates.

Building such infrastructure takes about 25 per cent of the total cost of a project which is usually passed on to the homebuyer, thus raising property prices.

5. Fast track approvals  

Developers in the affordable housing programme will enjoy fast-tracking of approvals for the projects.

Reforms in property registrations and access to affordable housing financing will also be fast-tracked for those involved in cheap housing.

6. Low-cost building technologies  

The state will facilitate the adoption of new low-cost building technologies and economies of scale to deliver affordable homes to its citizens.

These include reinforced concrete technology, prefabricated panels, interlocking bricks, expanded polystyrene panels (EPS), precast concrete panels, and ferrocement building technology among others.

7. Affordable housing relief  

Workers registered to the affordable housing programme will be eligible for a tax relief of up to Sh9,000.

Employers will subtract the amount from income tax before passing on the rest to the Kenya Revenue Authority, meaning what would have gone to taxes as Pay As You Earn will be saved to buy affordable homes.

8. Tenant purchase scheme 

In an arrangement with the National Housing Corporation, home buyers allotted houses under the programme will be allowed to occupy them before paying the full amount for the units.

They will instead make monthly payments using a tenant and a purchaser model.§

9. VAT exemption 

There will no Value Added Tax on construction inputs for the affordable housing projects.

Goods imported for the direct and exclusive use in the construction of affordable houses by licensed Special Economic Zones (SEZ) are exempt from the 16 per cent VAT.

10. Reduced tarrifs 

There will be reduced customs tariffs on imported inputs for construction of houses under the affordable housing scheme.

For instance, Import Declaration Fee (IDF) has been reduced from two per cent to 1.5 per cent. Additionally NEMA and NCA levies of 0.1 per cent and 0.05 per cent of the cost of construction respectively, have been scrapped. 

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