How tax incentives will help developers build more low-cost houses

In his budget statement recently, Treasury Cabinet Secretary Henry Rotich announced that the government would reduce corporate tax from 30 per cent to 20 per cent for developers who construct at least 1,000 units. The minister noted that the construction industry grew by 13.6 per cent while the real estate sector grew by 6.2 per cent, both being above the average national economic growth.

Some stakeholders are questioning possibility of a single investor putting up 1,000 units in a year.

The tax incentive is expected to encourage mass housing development to bridge the demand-supply gap for low-cost housing.

The Housing ministry has identified industrial building system providers who have built factories for material production. These include expanded polystyrene panels, interlocking stabilised soil blocks, interlocking concrete blocks, concrete waffles for suspended floor slab and fibre cement roofing tiles.

The ministry is currently using these cost-effective and faster technologies in the construction of 1,850 police and prison houses with a completion period of four months.

To add up the numbers, the ministry is partnering with landowners, developers as well as public institutions and cooperative societies with large tracts of undeveloped land.

Indeed, the ministry has received a number of project proposals from investors who are willing to develop over 5,000 housing units and others 20,000 units.

Such an incentive will go a long way in attracting more investors. Furthermore, the government has waived the levies payable to the National Construction Authority and National Environment Management Authority, which will reduce the cost of putting up housing and the resultant inconveniences.

The government has also drafted a Built Environment Bill that provides a legal and institutional framework to address the provision of housing partly by establishing a one-stop approval process and one agency to collect the levies.

The regulations therein have repealed the Building Code of 1967 and incorporate emerging best practices, technologies, building materials and components, including ICT in the building process.

The code is more progressive and based on material preference rather than material prescription.

The ministry, together with stakeholders, has established a Housing Contact Group to address issues that have negatively impacted on housing delivery. These include cost of financing, legal framework and infrastructure services.

Some of the recommendations under consideration include alternative financing models to include pension funds and other provident funds to be lent directly to low-cost housing programmes, establishment of mortgage-backed securities and the creation of National Social Housing Development Fund, including issuing of housing bonds.

The ministry is also amending various laws that had become obstacles to registration of properties such as the Sectional Properties Act. The above measures will spur the housing sector and reduce the cost of construction which will be transferred to the end users.

— The writer is the principal secretary in the State Department of Housing