Home ownership: Tax rebates for saving through fund managers, investment banks

Cytonn Investments is the latest firm to launch home ownership savings platform known as Cytonn Affordable Housing Investment Plan (CAHIP).

This comes after fund managers and investment banks registered under the Capital Markets Act were included as approved institutions that can hold deposits under the Home Ownership and Savings Plan (HOSP).

According to the Finance Act 2019, the move took effect this January. The funds saved in a HOSP aid in financing first-time homebuyers.

According to the Income Tax Act, funds deposited under HOSP are withdrawn tax-free as long as they are used to purchase or construct a house. Should the depositor channel the funds to any other use, the funds become taxable at the time of withdrawal.

A depositor with CAHIP will make initial investments of Sh1,000 and a minimum monthly contribution of a similar amount.  

Cytonn Chief Operating Officer Shiv Arora said CAHIP seeks to provide attractive investment offers toward home ownership with an annual target yield of 11 per cent. “We are constantly striving to provide creative and innovative solutions in support of the government’s affordable housing agenda. CAHIP will provide individuals saving towards home purchase with an attractive investment proposition,” he said.

Reduced taxable income

Apart from accessing a flexible platform for savings towards home purchase, prospective home owners will see reduction of taxable income to a maximum of Sh8,000 monthly, or Sh96,000 per year.

The HOSP savings schemes will enable Kenyans develop a credit profile, raising the chances of accessing a mortgage upon the maturity of their savings.

“Apart from giving proof to financial institutions of one’s creditworthiness, we are encouraging a savings culture which ultimately makes it easier for an individual to acquire a home by efficiently raising a deposit for a house loan,” said Arora.

In the recent past, the government has made a number of institutional reforms aimed at facilitating savings for home ownership under the affordable housing pillar of the Big Four agenda.