Economy

New levy for developers of Sh5m houses

ngilu

Lands secretary Charity Ngilu at the Ardhi House registry. Photo/Salaton Njau

The cost of owning a home for middle-income earners is set to rise further as Lands secretary Charity Ngilu prepares to re-introduce a Bill in Parliament that imposes a 0.5 per cent levy on the project’s value.

Developers whose projects exceed Sh5 million will pay a construction levy of 0.5 per cent of the value of the contract before they can start work if the House approves the Bill. 

This translates to Sh25,000 more for a project worth Sh5 million.

The Bill, which is dated June 3, is set for introduction in Parliament after an earlier one was time-barred.

It paves way for the National Construction Authority (NCA) to impose new levies.

“The authority may suspend, cancel or revoke the registration of a contractor who commences construction work for which the owner has not paid the amount of the construction levy as provided in this regulation,” reads the Bill published by Mrs Ngilu.

‘‘There shall be payable to the authority such fees for its services as the authority may, with the approval of the Cabinet Secretary, determine from time to time.”

This looks set to pile more fees on Kenya’s property market which has recently witnessed increased activity as high-net worth investors pour billions of shillings in the sector to capture return from rising home prices and rental income.

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The National Environment Management Authority (Nema) has also issued a gazette notice dated September 17 that imposes a minimum charge of Sh10,000 or 0.1 per cent of project cost for environment impact assessment.

The Mining ministry, from last September, started collecting a two per cent royalty on construction materials — increasing the cost of quarry stones, concrete blocks, hardcore, ballast and sand.

In addition to defaulting developers being fined or imprisoned, NCA will also seek to recover from them money due as civil debt after three months.

The authority will also have the power to consider the final value of the completed work and assess the amount of levy afresh, meaning that owners who understate the value of a contract will be subjected to more charges.

But those who pay in excess of the original levy will be refunded the corrected final contract amount.

The rules place responsibility on the person who awards a contract exceeding Sh5 million to notify the authority and submit to it details of the job.

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