Nairobi Governor Evans Kidero has faulted Lands secretary Charity Ngilu for issuing regulations that imposed a levy on construction projects without consulting City Hall.
Mrs Ngilu, through a legal notice dated June 3, said that developers whose projects exceed Sh5 million will pay a construction levy of 0.5 per cent of the value of the contract to the National Construction Authority (NCA).
But Monday, Dr Kidero said the regulations were prepared without consultations and called on the national government to revoke the notice on fears that it could reduce activities in the property market.
“This levy affects the housing sector that falls within the jurisdiction of the county governments and it should have been prepared with our participation and concurrence,” he said in a statement.
“This levy is bound to impact heavily on housing as well as pushes the cost of providing urban technical services, which would in turn impact negatively on the ability of the county government to expand infrastructure services for socio-economic development.”
The governor has also petitioned Abu Chiaba, the chair of the Senate Energy, Roads and Transport committee, as well as his National Assembly counterpart, Maina Kamanda.
Dr Kidero warns that the levy will hit large-scale developers hard. At the entry level figure of Sh5 million, a contractor has to pay an additional Sh25,000 or fall foul of the law.
“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 regulations.
This is yet another cost in the property market which has recently witnessed increased activity as investors pump in billions of shillings to cash in on rising home prices and rental income.
The National Environment Management Authority (Nema) imposes a minimum charge of Sh10,000 or 0.1 per cent of project cost for environmental impact assessment.
Last September, the Mining ministry started collecting a two per cent royalty on construction materials – increasing the cost of quarry stones, concrete blocks, hardcore, ballast and sand.
The bulk of the real estate activity is happening within Nairobi, which accounted for 78 per cent of registered projects in the country last year.
Official data indicates that City Hall approved building plans valued at Sh190.6 billion last year out of the Sh243.1 billion registered across the country.
Dr Kidero said that the NCA levy could discourage investors keen a multi-billion-shilling housing deal with City Hall.
In May, Nairobi signed an agreement with Chinese firms – China Sichuan and China Railways – to build 55,000 housing units on City Hall’s land under a public-private partnership (PPP) deal.