City Hall will cap the new land rates at one percent of the current value of plots as opposed to using the 1980 valuation, raising property fees for some Nairobi landlords.
Nairobi Monday said new rates will be based on the current value of undeveloped land as City Hall dropped an earlier plan to peg charges on both the plot value and developments on the property. The valuation was also to take into account the number of floors in properties.
Currently, property owners pay land rates at 25 percent of the unimproved site value based on the 1980 valuation roll, which City Hall reckon has seen it lose on the appreciation of plots.
“Rates paid will increase, some will be by bigger margins but others may actually be less from what is paid now based on the appreciation of the land in the areas,” City Hall’s Chief Valuer Isaac Nyoike said on Monday.
He said the specific rates will be released at the end of the month with the new fees taking effect in January.
City Hall is seeking to cash in on the sharp appreciation of land in Nairobi over the past two decades on 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 rule of 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.
City Hall raised Sh1.97 billion from land rates in the year to June 2018, but the income stream suffers from defaults.
Property experts reckon Nairobi could have benefited from rate that is based on both the land and property value, arguing that it is losing billions of shillings given that Nairobi is fully developed and there are few unused plots.
Different jurisdictions use different methods to levy property rates. In Tanzania, for example, the tax is based on the value of the 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 value of the developments on the property.