Economy

City Hall proposes to double rates for Nairobi landowners

kananu

Nairobi Governor Ann Kananu. FILE PHOTO | NMG

Property owners in Nairobi will soon pay up to double the current land rates after City Hall tabled a proposal that fixes the charge to current asset valuation.

City Hall said new rates would be based on 0.115 percent of the current value of undeveloped land, according to the Nairobi City Finance Bill 2021, which sets the stage for costly levies.

“Exemption will be taken if the new rates are lower than the current rates then the current rates will apply, but if the new rate is more than double the current rates then only double the current rates will be levied,” reads in part the document.

Currently, property owners pay land rates at 25 percent of the unimproved site value based on the 1980 valuation roll, which City Hall says has seen it lose on the appreciation of plots.

Consequently, the county targets to more than double its land rates collection in the last financial year as it looks at collecting about Sh6 billion.

In the financial year ended June 30, 2021, City Hall collected Sh2.76 billion from land rates against a target of Sh5 billion.

Land rates are the top own-source revenue earner at City Hall, accounting for about 25 percent of revenue the county government collected.

City Hall is seeking to cash in on the sharp appreciation of land in Nairobi over the past two decades on an increased appetite for real estate deals.

Land prices started rising in 2003 after a new government came to power promising change following a 24-year Moi era characterised by a poor investment climate.

The price of an acre of land in Nairobi’s Upper Hill business district ballooned to Sh552 million from Sh120 million in 2010 and Sh50 million in 2002, property dealers say.

County assembly Budget and Appropriations Committee chair Robert Mbatia said the new levies, once approved by the MCAs, would take effect immediately after governor Ann Kananu assents to the Bill or after 14 days of the publication of the bill in the Kenya Gazette.

Different jurisdictions use different methods to levy property rates. In Tanzania, for example, the tax is based on the value of a building.

In other countries like India and the United Kingdom, the tax is based on the income (rent) generated or an assigned rent estimated to be generated from the property.

In the US, property taxes are based on the land and the value of the developments on the property.

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