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Developers upbeat following scrapping of building levies

By Mwaghesha Mkala | July 21st 2016

The government’s recent decision to scrap construction levies charged by the National Construction Authority (NCA) and National Environment Management Authority (Nema) was a prayer answered for many in the real estate sector.

During this year’s budget speech last month, Treasury Cabinet Secretary Henry Rotich said the government decided to remove the levies to reduce the cost of doing business. Developers have been paying the NCA 0.5 per cent of the total value of construction projects worth over Sh5 million.

Real estate players say the scrapping of the levies was long overdue. “If you are planning to develop a property, you need to pay statutory charges to a number of bodies. They require money but offer very little support in return.

“You need approvals from the county, when building next to a water body, you have to get approval from WARMA (Water Resources Management Authority). You have to pay Nema for an environmental assessment report and approval, and still pay NCA some money. If you do not have money for all these, the project will stall from the onset,” says Aaron Gitonga, a property developer and a director at Getso Consultant Limited.

He adds: “If only we could have one consolidated authority and have the fees paid once.”

Nema charges a minimum of Sh10,000 or 0.1 per cent of project cost for impact assessment, following a revision from a maximum of Sh1 million in 2014.

Gitonga’s sentiments are echoed by Ashok Rupshi Shah, founder, chairman and managing director of Abacus Properties Consultants, the firm behind the upcoming 200-acre Infinity Industrial Park, off the Eastern Bypass.

“I wish there was one dedicated department in government where all major investors could visit to get all approvals at once.”

“There is too much back-and-forth between us and many departments, which has pushed our project behind by about six months. This means we are incurring more costs than we had estimated,” Shah says, noting that it was easier to start a business in most neighbouring countries due to the ease of doing business in those countries.”

“I personally know many foreign investors who have come to do feasibility studies but have to leave because of government red tape. Some have left for Ethiopia and other neighbouring countries, even as they lament on the great opportunity Kenya offers for their investments,” he says.

What does all this mean for the two bodies? “Since the bodies will stop concentrating on revenue collection, they will now be able to concentrate on their core business, which is policing the sector,” says Gitonga. “This will also reduce corruption within the bodies, especially among field officers.”

Accordingly, he says, it will be easier to start projects since the financial burden will be less. There will be more compliance with the Nema and NCA requirements, he said.

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