Government incentives for developers of low-cost houses

By Mwangi MuiruriThe Government has announced a five per cent rebate on the total cost of constructing residential rental buildings to lure private investors to invest in low cost flats. Further, goods and services for housing estates with more than 20 units will be exempted from paying tax.Housing Minister Soita Shitanda announced this as he addressed participants and guests during the Kenya Property Expo in London late last month. Briefing Home & Away recently on this development, Shitanda revealed other incentives that include exemption of interest earned on deposits for home ownership of up to Sh3 million. Prime Minister Raila Odinga on a recent visit to the Kibera slum upgrade projectHe said the move is backed by the May 2008 Housing Finance’s launch of a Sh2.3 billion rights issue to raise funds to boost property development. London real estate exhibitionThe London Property Expo was a follow up to the inaugural event that was held last year in London. This year’s theme was ‘Invest in Africa; Build Africa.’ During the expo, Shitanda appealed to the Diaspora to consider investing in real estate in university towns like Kakamega and Meru, which are experiencing an acute shortage of housing for both the staff and students. Real estate is a major component of Kenya’s wealth stock and it contributed 5.5 per cent to the Gross Domestic Product (GDP) in 2006/07 fiscal year.Upgraded slum housesMeanwhile, Shitanda has affirmed that Kibera slum residents will afford the completed upgraded houses despite current valuation that has pegged their cost at between Sh0.5 to Sh0.8 million.The minister says that while the figures sound big and unrealistic for slum dwellers, in essence the pricing is very cheap. "When the value of land and the house, which is a quality permanent structure, as well as the long-term result of the house reverting to the beneficiary are put into consideration, the pricing is very friendly," Shitanda says.The minister says beneficiaries will pay through instalments spread to as many as 100 months. In average, this means monthly instalments will be as low as Sh4,000. "Since the units have three self-contained rooms, beneficiaries can sublet two rooms and occupy one room," he says. "The market value for one room will average at Sh4,000, meaning the sublet of two rooms will post a monthly income of Sh8,000. Since the beneficiary will not be paying rent, how hard will it be to submit the monthly instalment?" Shitanda poses.The minister, however, acknowledges that the challenge lies in meeting the current demand since Kibera has an estimated population of one million but, so far, the upgraded houses total only 600. The first beneficiaries of the estate upgrade will be from Soweto East village that has an estimated population of 80,000.

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