Construction levy hikes a blow to struggling builders

Construction workers build a house in Kisumu.
Construction workers build a house in Kisumu. PHOTO/FILE
Owners of any construction works whose value exceeds Sh5 million will be required to pay the National Construction Authority (NCA) at least Sh25,000, backdated to June 6, as a new levy takes effect.

In a newspaper advert Friday, the NCA said the 0.5 per cent construction levy is payable to the authority by owners of construction projects above Sh5 million, including government ministries and departments, State corporations, private companies, NGOs, social groups and individual developers.

“This is in relation to all construction projects in buildings, roads, water works, electrical works and other related works that require the services of a contractor,” NCA executive director Daniel Manduku said.

Developers will be required to register their projects with the NCA within 30 days of awarding a contract, after which the authority will notify the developer of the amount of levy payable for the works.

“The amount of levy so notified shall be paid in full by the owner/developer to the authority upon which the authority shall issue a compliance certificate. No construction works shall be commenced without this certificate,” said Mr Manduku.

The authority has the powers to de-register contractors who begin work without paying the levy.

This means a developer of a Sh5 billion shopping mall will be required to pay Sh25 million to the NCA before he can embark on the construction project.

The money will be used by NCA to establish a revolving fund that will see small contractors accessing loans of up to Sh5 million to finance their projects.

The loans will be offered at interest rates of between four and six per cent through commercial banks.

READ: NCA to offer cheap loans to small contractors

NCA will inspect completed buildings to ensure that the projects were not undervalued. Developers who understate the value of their projects will be subjected to more charges.

The construction levy adds yet another cost to developers who are already grappling with high cost of materials and interest rates.

The levy is already facing fierce opposition from developers as well as local leaders who argue that it could further push up the cost of building houses.

“This levy is bound to impact heavily on housing as well as pushes the cost of providing urban technical services, which would in turn impact negatively on the ability of the county government to expand infrastructure services for socio-economic development,” said Nairobi governor Evans Kidero.