President Uhuru Kenyatta when he signed into law Tax Laws (Amendment) Bill at State House, Nairobi. It creates a 15 percent tax relief and exemption from Stamp Duty for Kenyans buying houses under the Affordable Housing Scheme. PHOTO | FILE
An employer and employee are separately required to contribute 1.5 per cent of the monthly basic salary so long as the sum of the employer and the employee contributions does not exceed Sh5,000.
This means an employee earning Sh100,000 will contribute Sh1,500 every month to the fund – up to a maximum Sh5,000 for those earning Sh330,000 and above.
Contributors to the fund can then access financing to buy low-cost homes, either through tenant purchase agreements or other schemes.
Delay in publication of guidelines for President Uhuru Kenyatta’s affordable housing scheme has offered Kenyan workers temporary reprieve from deductions that were to begin this month.
Guidelines for the scheme, which will see workers contribute 1.5 per cent of their monthly pay into fund, are expected this week – meaning the deductions could begin in earnest next month.
The Attorney-General’s office last week received the regulations prescribing the requirements for qualification to contribute to the scheme, after Cabinet approval.
“They will be published on Tuesday or Wednesday. The date the guidelines are published is when (payment to the National Housing and Development Fund) is effective,” said Housing principal secretary Charles Hinga.
A clause in the Finance Act 2018 that says payment "shall become effective upon the gazettement of regulations prescribing the requirements for qualification to the scheme by the Cabinet Secretary responsible for housing in consultation with the Cabinet Secretary responsible for Finance.”
The guidelines also set standards for financing, costing and design to ensure the houses are of high quality and affordable.
The creation of the fund is meant to help the government deliver half a million affordable housing units in five years. The plan is part of efforts to bridge the huge housing deficit which stands at 1.85 million units.
Under the National Housing Development Fund plan, an employer and employee are separately required to contribute 1.5 per cent of the monthly basic salary so long as the sum of the employer and the employee contributions does not exceed Sh5,000.
This means an employee earning Sh100,000 will contribute Sh1,500 every month to the fund – up to a maximum Sh5,000 for those earning Sh330,000 and above. Contributors to the fund can then access financing to buy low-cost homes, either through tenant purchase agreements or other schemes.
The 1.5 per cent tax will generate about Sh57 billion a year, and is part of Mr Kenyatta’s plan to plug the Sh530 billion budget deficit. The scheme seeks to put up 800,000 affordable units targeting buyers and 200,000 social units in slum developments in Nairobi, Mombasa, Kisumu, Nakuru and Eldoret.
The fund has faced hostility from unions and employers who consider it an additional burden.
Mr Kenyatta signed the Finance Act 2018 into law in September, increasing the pressure of extra taxes on Kenyans to finance the country’s budget. This includes the 12 per cent excise duty on fees charged for mobile money transfer services, the 15 per cent excise duty on telephone and Internet data services and the 20 per cent duty on fees charged for money transfer services.
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