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Economy

Homes tax drops 21pc on low property sales

Residential apartments
Residential apartments in Mlolongo, Machakos. FILE PHOTO | NMG 

Tax paid on home and land transfer, stamp duty, will drop 21.5 per cent in the year end June, reflecting the drop in property sales on reduced supply of loans and cash flow hitches.

Fresh statistics show the Treasury expects revenue from stamp duty to dip to Sh9.51 billion from Sh12.13 billion recorded in the previous year ended June 2018.

The fall in revenue from stamp duty is a pointer to reduced deals in land and houses, reflecting the recent slump in activities in real estate sector.

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.

Housing has been one of Kenya’s fastest growing sectors in the last decade, with returns from real estate outpacing equities and government securities.

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The property market is gripped with reduced sales in bearish conditions captured in recent surveys on the sector by realtor Knight Frank, consultancy HassConsult and the Kenya Bankers Association (KBA) show.

This has been linked to reduced access to credit by prospective homebuyers, leaving developers stuck with houses, especially those in the upmarket areas.

A number of property developers face property auctions as players in auxiliary sectors like cement, paint makers and steel manufacturers like East Africa Portland Cements Company reporting lower sales and profits.

The KBA latest survey suggested house prices dropped 2.78 percent during the first quarter of 2019, the first decline since the last quarter of 2014.

Knight Frank Prime Global Cities Index, which focuses on high-end property, indicated house prices softened by half a percentage point in the period.

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