From a report released last year by the Central Bank of Kenya and World Bank, it was evident that more than 90 per cent of Kenyans cannot afford to buy a house, even with the aid of mortgage loans.
The shocking revelations also indicated that only 8 per cent of Kenyans can afford mortgage loans! This report paints a grim reality of just how property prices have sky-rocketed within the past five years.
To save the situation, the government should step in by offering incentives to developers for building low cost houses. The government should consider waiving value added tax (VAT) on low cost housing projects valued in the excess of Sh15 million, for example. Savings from such tax exemptions will encourage construction of more low cost houses.
Other incentives that can further spur the development of affordable housing include lower tax on housing bonds, tax deductibility on housing loans and tax deductibility for expenditure on social infrastructure.
Developers greatly value incentives because they reduce the cost associated with the development, thereby making a project more profitable.
If the government can give incentives for construction of transport infrastructures and ICT parks, it should also offer incentives to developers for building affordable houses in the urban centres.
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