Property developers will not be required to pay construction levies to State agencies and counties for their projects, as the Kenyan government moves to tackle shortage of affordable housing in the country.
“Multiple charges levied by various ministries, departments, agencies and county governments on the construction industry have contributed to the increase of costs in the sector and led to inordinate delays in obtaining requisite approvals,” read the statement.
In September 2014, the NCA introduced a 0.5 per cent construction levy payable by owners of projects valued above Sh5 million – money that was to be used to establish a revolving fund that would see small contractors accessing loans of up to Sh5 million to finance their projects.
On the other hand, Nema had in 2013 removed a flat rate fee and introduced a minimum assessment charge of Sh10,000 or 0.1 per cent of the total project cost, without a maximum limit – which proved punitive for large scale property developers.
The government said on Tuesday that the two levies, and those charged by counties, had undermined its efforts to encourage affordable housing developments in the country, hence it was necessary to scrap them.
In his Budget speech in June, Treasury CS Henry Rotich said the State had resolved to scrap the levies in a bid to lower construction costs. This, however, did not happen as Nema and NCA argued that the charges were enshrined in law and could only be scrapped by Parliament.
Following the Cabinet decision on Tuesday, it is now clear that the government is keen to scrap the levies, but it is yet to be clarified as to whether the State’s pronouncement will take effect straight away or it will set stage for the change of laws to allow for removal of the levies.