Workers will get Sh9,000 a month in tax relief that will be channeled to savings for homeownership. This is one of many incentives meant to actualise the government’s affordable housing plan.
Employers will subtract the amount identified as Affordable Housing Relief (AHR) from income tax deducted before passing on the rest to the Kenya Revenue Authority.
A person earning Sh90,000 a month is currently liable to Pay As You Earn of Sh20,740 but under the housing incentive plan, their income tax would reduce to Sh11,740.
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This is among the incentives that the government has lined up to salvage President Uhuru Kenyatta’s homes dream, which has so far faced a myriad of challenges. Other reliefs to be extended to developers include the scrapping of Value Added Tax on inputs and reduced import duty for materials bought outside the country.
Charles Hinga, the Principal Secretary for Housing and Urban Development, said KRA will be issuing details on tax relief to employers. Technically, saving into the housing fund has become voluntary as only workers who register for the programme will enjoy the relief.
Initial plans to force employers to deduct the equivalent of 1.5 per cent of workers’ pay to the housing fund were dashed by the courts which ruled that the proposal was illegal.
Hinga was speaking at the handing over ceremony of the first phase of the 1,370 housing project known as Park Road in Nairobi’s Ngara.
Two hundred and twenty-eight two-bedroom units have so far been completed while the second phase, which is currently in the painting stage, will be handed over in June.
The last phase is scheduled to be completed in December, marking the first success of the dream announced nearly three ago. What remains is the advertisement for sale of the houses, which will begin within the week before balloting is done to find beneficiaries.
Such buyers need to have saved 12.5 per cent of the selling price before getting a mortgage to offset the balance at nine per cent interest and for an extended period of up to 25 years.
Hinga said that the 500,000 housing units target by 2022 would be surpassed considering the over Sh1 trillion that has been committed by investors.
“As strategic partners, the investors and developers in the Affordable Housing Programme will enjoy fast-tracking of approvals for projects, 15 per cent corporate tax rate, no VAT on construction inputs for affordable housing projects; reduced customs tariffs on imported inputs,” he announced.
Bulk infrastructure to projects sites including sewerage, electricity, and water will also be prioritised by various ministries, departments and government agencies, the PS added.
Hinga’s optimism of hitting the set target is informed by the interest declared so far, especially from the private sector, which is the main driver of the programme.
Among the investors is the United Nations Office for Project Services, which has committed Sh500 billion to develop 100,000 units in Athi River.
An additional 11 partners from the private sector are expected to deliver an estimated 155,000 units within the year as their proposals are currently at various stages of evaluation.
Already, a private developer known as Heri Homes had its Habitat Heights project in Lukenya, Machakos, launched by President Kenyatta last month as the first privately-funded under the housing programme.