Kenyans face higher rents and home prices following a sharp increase in property taxes by county governments, the Institution of Surveyors of Kenya (ISK) has warned.
In Nairobi, Kiambu and Nyandarua taxes and fees on land and buildings have doubled as the governments seek to finance their ambitious annual budgets.
“Majority of the counties have proposed high and punitive rates with some increasing the rates as high as 200 per cent. … You can expect that this will translate into higher rents and property prices,” ISK chairman Collins Kowuor.
ISK said on Monday that the new taxes will dampen growth of the property sector.
In Nairobi, property taxes are supposed to bring in Sh797 million, a quarter of all its revenues, by the end of this financial year.
This should then rise to Sh909 million in the next fiscal year and over Sh1 billion by 2016/17. In Kiambu, the project approval fee has been raised to two per cent of the estimated worth of the property.
ISK said this would raise rents and property prices not just in Kiambu, but also have ripple effects in Nairobi and its environs. The two per cent surcharge is half of what is charged as stamp duty, the single largest upfront fee on property in Kenya.
In the largely rural Nyandarua County, the transfer fee for a permanent residential plot will cost Sh6,000 while that for farms will cost Sh5,500.
In the approval of building plans, anyone applying to put up a petrol station will pay Sh20,000. Some of the fees were previously minimal or non-existent.
Mr Kowuor said the move will prove counter-productive as developers shy away from meeting the rising demand for new buildings, thereby raising rents and prices for existing units.
He said that whereas counties are free to raise rates and fees, they should not put them so high that they constrain economic growth which was envisaged with the onset of devolution.
“The county is also allowed to raise its own revenues through imposition of property taxes, entertainment taxes as well as other taxes. For the FY 2014/15, the county projects revenue from these sources amounting to Sh3.3 billion,” reads part of the Nairobi County Government Finance Bill.
Mr Kowuor said that suspension of land transactions in counties such as Kajiado was having a negative impact on investors.
“Some of their concerns include poor planning and inappropriate change or extension of user. While these concerns could be valid, the moratorium has taken too long,” said Mr Kowuor.
He said the ISK was ready to offer county governments technical support to resolve the concerns over land transactions.