15 Percent Corporate Tax Relief Now Law for Residential Developers

By Juma Fred / September 27, 2016



Built to suit: The way of the future for real estate in Kenya

In an attempt to boost the supply of housing for low income earners in the country, President Kenyatta last week signed into law The Finance Bill 2016, which offers a 15 percent corporate tax relief to developers who put up at least 400 low-cost residential houses annually, a reduction from the initially 1,000 suggested by the Treasury cabinet secretary in June.

The move by the President will help curb the current high housing deficit that is concentrated in the low income segment given the following factors:

Tax incentives – Tax has been a big expense hence increasing on the costs incurred by the developers, which in turn discouraged developers from developing low cost housing

Poor performance of high end market – There is a stagnation in prices of high end property due to too much supply that had hit that segment of the market. The sector has well witnessed a 0.2 percent decrease in prices for luxurious houses between April to June 2016.

Lower interest rates – The decreased interest rates by banks will result into reduced the cost of financing real estate developments hence leading to lower project costs, translating to relatively lower selling prices to end users.

Innovation: Creative payment schemes such as tenant purchase will make the low income segment to be an attractive investment option to clients hence increase uptake.

Read: Local Investors to Benefit from New NCA Rules

Last week China – Africa Development Fund (CAD Fund), a private equity firm, signed a deal with the government and two construction firms; Kenya’s Suraya Group and China Civil Engineering Construction Company (CECC) to build 20,000 civil servant houses.

This is meant to be a public – private partnership (PPP) deal, with the following structure; the government will provide land, CECC will be the construction company, Kenya’s Suraya group will be the project management firm and CAD Fund the financiers.

CAD-Fund, controlled by China Development Bank, also opened a representative office in Nairobi; the office will also be used as regional headquarters for Eastern Africa. This signed PPP comes at a time when various local PPP agreements have been deemed to fail over the past years both at the county and national levels because for a PPP to attract private capital into a project, the respective land has to be separated and moved into a special purpose development vehicle that has title to the land and there is currently no framework to enable transfer of public land into special purpose vehicles that can attract private capital and bank debt. However, the already signed PPP with a financier on board has a high probability of success, which will contribute into curbing the current housing deficit that is more concentrated in the low income segment.

Read: Six-lane Nairobi-Nakuru Highway to Cost 16.4 Billion

 



About Juma Fred

Juma Fredrick is an enthusiastic journalist who believes that journalism has power to change the world either negatively or positively depending on how one uses it.You can reach him on: (020) 528 0222 or Email: [email protected]

View other posts by Juma Fred


More Articles From This Author








Other Related Articles










SOKO DIRECTORY & FINANCIAL GUIDE

ARCHIVES

2019
  • January 2019 (256)
  • February 2019 (216)
  • March 2019 (203)
  • 2018
  • January 2018 (291)
  • February 2018 (220)
  • March 2018 (279)
  • April 2018 (226)
  • May 2018 (240)
  • June 2018 (178)
  • July 2018 (257)
  • August 2018 (250)
  • September 2018 (256)
  • October 2018 (287)
  • November 2018 (286)
  • December 2018 (187)
  • 2017
  • January 2017 (183)
  • February 2017 (195)
  • March 2017 (207)
  • April 2017 (104)
  • May 2017 (169)
  • June 2017 (206)
  • July 2017 (190)
  • August 2017 (196)
  • September 2017 (186)
  • October 2017 (235)
  • November 2017 (253)
  • December 2017 (266)
  • 2016
  • January 2016 (167)
  • February 2016 (165)
  • March 2016 (190)
  • April 2016 (143)
  • May 2016 (246)
  • June 2016 (183)
  • July 2016 (271)
  • August 2016 (250)
  • September 2016 (234)
  • October 2016 (191)
  • November 2016 (243)
  • December 2016 (153)
  • 2015
  • January 2015 (1)
  • February 2015 (4)
  • March 2015 (166)
  • April 2015 (109)
  • May 2015 (117)
  • June 2015 (121)
  • July 2015 (150)
  • August 2015 (157)
  • September 2015 (189)
  • October 2015 (171)
  • November 2015 (174)
  • December 2015 (208)
  • 2014
  • March 2014 (2)
  • 2013
  • March 2013 (10)
  • June 2013 (1)
  • 2012
  • March 2012 (7)
  • April 2012 (15)
  • May 2012 (1)
  • July 2012 (1)
  • August 2012 (4)
  • October 2012 (2)
  • November 2012 (2)
  • December 2012 (1)
  • 2011
    2010
    2009
    2008
    2007
    2006
    2005
    2004
    2003
    2002
    2001
    2000
    1999
    1998
    1997
    1996
    1995
    1994
    1993
    1992
    1991
    1990
    1989
    1988
    1987
    1986
    1985
    1984
    1983
    1982
    1981
    1980
    1979
    1978
    1977
    1976
    1975
    1974
    1973
    1972
    1971
    1970
    1969
    1968
    1967
    1966
    1965
    1964
    1963
    1962
    1961
    1960
    1959
    1958
    1957
    1956
    1955
    1954
    1953
    1952
    1951
    1950