Your are here  » Home   » Home & Away

Budget could scrap property stamp duty

Updated Thursday, June 3rd 2010 at 00:00 GMT +3
Share this story:

Larger mortgage loans

If treasury abolishes the stamp duty, Kenya will have followed in the footsteps of countries such as South Africa where stamp duty charges were withdrawn years ago to spur development in the property sector and encourage home ownership.

In countries like the United Kingdom for example, which coincidentally Kenya draws most of its laws from, stamp duty tax regime was revised several years ago to take into account the nature of the transfer transaction and other interests. In the UK, stamp duty is varied depending on the property being sold among other considerations while in Kenya, it is charged at a flat rate of four per cent of the total value of any commercial property transaction.

The current stamp duty regime also requires that an individual is charged two per cent of the value of agricultural land bought despite agriculture being the backbone of the countries economy.

Property analysts say a change of the current stamp duty regime or the complete scrapping of the tax will enable commercial banks approve larger mortgage loans at lower interest rates as it will have removed the interest rate premium charge levied in the process of securitisation of any collateral.

Property and finance analysts also reckon that the development is bound to lengthen the repayment periods for mortgage loans and other forms of secured lending as the time consuming process of completing a stamp duty transaction will have been removed. This then enables many in the middle and lower class to own homes.

Simplified rules

"We need to encourage investors to put money into the real estate sector by doing away with some taxes and stamp duty stands out in this category among other incentives," says Mr Reginald Okumu of Arc Consultants, a property firm.

"This is one of the many ways the property industry will grow; investors encouraged to pump money into the real estate sector and the middle class actualise their dreams for home ownership."

The revelations of doing away with the stamp duty come at a time when the Central Bank of Kenya has formed a committee to spearhead reforms on how borrowers use collateral to secure credit.

In addition to a new tax regime regarding stamp duty, Treasury is also looking at simplifying rules and regulations governing property transfers. This includes the reduction of the time it takes to complete property transfer from a seller to a buyer and also for a mortgage firm or a financial institution to complete securitisation of collateral.

This follows a recent report by the Financial Sector Deepening Trust that rigorously faulted laws and regulations governing collateral as security against loans.

GO TO PAGE « Prev 1 2 3 4 Next »
Share this story:
Do you have something to add to this story? Comment here.
Home & Away
Comment Policy