Developers face increased cost of construction after the Treasury slapped a 35 percent excise duty on key imports largely used for interior design in proposed changes to taxation laws.
The Tax Laws (Amendment) Bill 2024, which is undergoing a public participation phase, has introduced a new excise duty on key construction finishing ceramic materials imported into the country in a protectionist policy shift.
The changes, if passed by lawmakers, will see the cost of imported tiles and sanitary ware increase in a market which largely relies on imports, raising prices of houses.
Importers of finishing materials such as ceramic flags and paving, wall tiles or heath and unglazed ceramic mosaic cubes face a 35 percent, or Sh300 per kilogramme, increase in the Bill.
Sanitary fixtures such as ceramic sinks, wash basins, wash basin pedestals, baths, bidets, water closet pans, flushing customs cisterns and urinals shipped into the country will, on the other hand, cost 35 percent or Sh100 for every kilogramme, if the proposed law more is enacted.
“The introduction of an Excise Duty on these product goods will likely increase the business costs potentially leading to higher prices to the final consumer,” tax experts at PricewaterhouseCoopers wrote in their analysis.
Industry players reckon the proposed introduction of excise taxes will jolt ongoing and upcoming projects as contractors and developers deal with budget overruns as a result of higher material costs than earlier projected.
The industry largely relies on imported tiles and sanitary ware for supply because of a variety of designs, sizes and finishes, insiders say.
"Imported tiles and sanitary ware offer a level of quality and design diversity that is not yet available locally. These duties will compromise the aesthetic standards of Kenyan buildings," said an interior designer.
The proposed raises in excise duty are part of the tax bill which Treasury Cabinet secretary John Mbadi is seeking approval from lawmakers to raise an estimated Sh136 billion to partly fill the Sh344.3 billion hole left following the collapse of the Finance Bill 2024.
Cost of construction has been a major impediment in putting up affordable housing units, prompting President William Ruto’s administration to enforce a 1.5 percent housing development levy on gross pay of workers —matched by employers— to bridge an estimated annual gap of 200,000 units.
The levy raised Sh54.16 billion from employers and employees in the first year of enforcement, but less than a third, or Sh16.65 billion was spent on affordable housing in that period.
“We shall do all that is necessary including providing infrastructure, providing land to private developers so that we are able to meet the planned units at an affordable price,” Housing and Urban Development Principal Secretary Charles Hinga said in the past.
