Economy

Bill to ease home ownership now goes to Parliament

house

The State’s affordable housing plan targets to build 500,000 “decent” homes for low income earners in the next five years. file photo | nmg

The government has published a Bill that will exclude first-time home buyers from paying stamp duty in a bid to help workers struggling to get into the property ownership bracket.

The tax is charged on the market value of the property at the rate of four per cent in towns and two per cent in rural areas and must be paid to the taxman within 30 days of contract execution.

National Assembly Majority Leader Aden Duale has tabled a Bill in the House seeking to amend the Stamp Duty Act to spare first time home buyers from the tax which is ranked a top expense in property acquisition.

“There shall be exempt from stamp duty under this Act— the purchase of a house by a first time home owner under affordable housing scheme,” says the Bill without giving details on the scheme.

For instance, an investors buying a Sh10 million house needs to part with Sh400,000 as stamp duty costs.

Elimination of the duty means that first time house buyers only have to worry about other expenses such as the lawyer’s fees (usually about one per cent of the purchase price), the valuation cost, and a commitment fee to the bank.

“The Bill seeks to amend the Stamp Duty Act to provide an incentive to first time home owners,” Mr Duale said.

First time home buyers will join a list of transactions exempted from stamp duty including transfer of property in a will, spousal property transfer, and gift to a charitable organisation.

READ: Treasury sets up financier for Uhuru's low-cost home loans plan

Others are transfers between associated companies and hand over of family property to a company wholly owned by family members.

Providing affordable housing is one of President Uhuru Kenyatta’s four key priority areas in his second term.

The government’s affordable housing plan targets to build 500,000 “decent” homes for low income earners in the next five years.

The government is set to incorporate an entity called the Kenya Mortgage Refinance Company (KMRC) by end of this month to oversee the project.

The KMRC, backed by a Sh1.5 billion seed capital contributed by the government and at least Sh30 billion more from other international financiers like the World Bank and the African Development Bank, will guarantee local banks and saccos to extend mortgage to low income earners. 

In order to qualify for exemption, an applicant will have to make an application to the Kenya Revenue Authority and provide a statutory declaration or affidavit stating that they are keen to participate in the housing scheme.