Henry Rotich the National Treasury Cabinet Secretary while presenting the 2016/2017 budget stated that the government was removing all levies charged by NEMA and the National Construction Authority in order to reduce the cost of doing business. This has been applauded across the construction quarters. The real estate developers have been in the recent past raised their voice urging government to address these levies as they immensely raised the construction cost thus slowing the industry which annually falls short of over 200,000 houses.
The real estate industry has been putting up 50,000 housing units, yet the country’s housing demand amounts to over 250,000 units every year. This is expected to change drastically with the relaxation of the tariffs.
Since 2013, investors going into the construction sector were required to submit a minimum assessment fee that amounted to Sh10,000 or 0.1 percent of the project cost. Those whose projects exceed Sh5 million are required to pay 0.5 percent of the value of the contract before starting a project.
Apart from scrapping the levies the Kenyan government has also lowered corporate tax for real estate developers by 10% to 20 per cent down from 30 per cent, in a move intended to deal with the shortage of housing in the country
The NCA will not however be rendered obsolete as it shall focus on its core mandates which include:
- To Accredit and register contractors and regulate their professional undertakings
- Renewal of practising license
- To undertake or commission research into any matter realting to the construction industry.
- To accredit and certify skilled construction workers and construction site supervisors. Accreditation ensures that all individuals participating in the various trades have the necessary skill to undertake the same.
- Construction Project registration
- Training contractors in various key areas touching on the industry.
Similarly NEMA will pay attention to matters relating with environment as stipulated in Environmental Act.
The Authority core functions are:
- Coordinating the various environmental management activities being undertaken by the lead agencies.
- Promote the integration of environmental considerations into development policies, plans, programmes and projects, with a view to ensuring the proper management and rational utilization of environmental resources, on sustainable yield basis, for the improvement of the quality of human life in Kenya.
- To take stock of the natural resources in Kenya and their utilization and conservation.
- To establish and review land use guidelines.
- Examine land use patterns to determine their impact on the quality and quantity of natural resources.
- Carry out surveys, which will assist in the proper management and conservation of the environment.
- Advise the Government on legislative and other measures for the management of the environment or the implementation of relevant international conventions, treaties and agreements.
- Advise the Government on regional and international conventions, treaties and agreements to which Kenya should be a party and follow up the implementation of such agreements.
The new tax incentives are projected to encourage real estate developers build more houses in a more friendly investment environment to meet the ever-rising housing demand, particularly in the low cost housing segment.