The Kenyan government, in support of Vision 2030 and in accordance with the Kenyan Constitution, which provides that every person has a right to access adequate house ownership and reasonable standards of sanitation, has provided tax reliefs and incentives that encourage home ownership to both home buyers and investors. Vision 2030 lists home ownership and urbanization as key indicators in the realization of its objectives. Both Medium Term (MTP) 1, MTP 2, MTP 3, and MTP 4 have prioritized affordable housing as a key element in the realization of 2030 objectives through budgetary allocation and partnerships with financial institutions and private developers, cooperatives, and manufacturers of building materials.
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The government has embarked on the use of targeted tax policies to provide incentives to developers and home buyers to encourage home ownership. First, the government provided an income tax exemption for every lump sum paid out of a registered home ownership savings plan that is used to purchase an interest in or for the construction of a permanent house for occupation by the depositor within twelve months immediately following the withdrawal. In addition, the amount withdrawn from the National Housing Development Fund to purchase a house by a contributor who is a first-time owner is exempt from income tax.
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Second, home buyers are entitled to an interest deduction on mortgages with a maximum cap of three hundred shillings upon borrowing funds from licensed banks, insurance companies, the National Housing Corporation, cooperative societies, and building societies for the purchase or renovation of their own houses for personal residential use.
In addition, developers who exceed the hundred-unit mark in house construction in a year are entitled to a reduced corporate tax of 15% for the same year.
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The government uses the above policies as a strategy to aid in the realization of the Vision 2030 affordable housing agenda and the current government’s pledge to produce 250,000 affordable housing units every year.
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