How Donald Trump's remittance tax is threatening property investments in Kenya

Workers at Affordable housing at Lumumba in Kisumu city, traders taking opportunities that are cropping up from the project. [Michael Mute, Standard] Kenya's real estate sector could be staring at another shock following the American government's move to tax diaspora remittances. The move follows the signing into law of President Donald Trump's "One Big Beautiful Bill" on July 4, 2025. A key provision in the Bill was the one per cent remittance tax charged on the transfer of money from the United States to another country. The tax applies to all individuals, regardless of citizenship status, who send remittances from the US using cash transfers, money orders, or cashier's checks. It will be in addition to the six per cent that US migrants already pay in remittance fees to these platforms. The new tax comes hot on the heels of funding cuts to USAID, the main American aid agency, and the introduction of trade tariffs targeting exports to the United States. Interestingly, the primary objective of the remittance tax is to curb illegal drug and human trafficking. Despite these ideals, however, analysts have raised concerns about the potential for the new law's unintended consequences, stating it will muzzle development programmes in low and middle-income countries. According to the Centre for Global Development, the tax that comes into effect on January 1, 2026, "would be likely to reduce remittances sent through formal channels such as banks and money transfer operators like Western Union", the most preferred methods of money transfers from the United States. The move, financial analysts say, will affect remittances in two possible ways: first, by reducing the amount sent since part of the cash will be diverted towards the new tax, and second, by discouraging remittances altogether. However, Knight Frank chief executive Frank Dunford said the impact may not be huge. "The reality is that one per cent remittance tax may not November the needle or make much of a difference in the sector," said Dunford. Data from the Central Bank of Kenya (CBK) reveals that diaspora remittances to Kenya declined by $17 million (Sh2.1 billion), or 3.86 per cent, last month. "Total remittances for the month stood at $423 million (Sh54.57 billion), down from $440 million (Sh56.76 billion) recorded in May," noted the CBK report. The decline raises concern for Kenya, which is heavily reliant on these inflows for household incomes and foreign exchange stability. And while the tax percentage may appear minimal, it would still hurt money transfers to Kenya due to the volumes involved. According to a January 2025 bulletin by CBK, remittance inflows to the country reached an all-time high of $4.94 billion (Sh642.8 billion) in 2024, an 18 per cent increase compared to $4.19 billion (Sh544.7 billion) in 2023. The figure is projected to hit Sh1 trillion by 2027. The bank says the "United States remains the largest source of remittances, contributing 51 per cent of total inflows in 2024, adding that these remittances "continue to support Kenya's current account and stability of the exchange rate". In Kenya, the move is expected to have ripple effects in the real estate sector, especially for those Kenyans in the diaspora who remit cash for home buying or construction. Others use the cash to invest in completed or ongoing housing projects. "A significant portion of these funds flows into real estate for investment purposes [including] serviced plots and villas for rental or resale," says a report posted by Centum Real Estate, adding that some of the cash is invested in home ownership, especially in gated estates. Diaspora remittances have spurred the construction of new projects and expansion of existing ones in a number of counties. The funds have also provided a diversification of funds and thus reducing pressure on traditional financing methods such as bank loans. "The inflow of remittances has encouraged financial institutions to offer better mortgage products and housing loans due to increased liquidity. This has made it easier for individuals to access financing and invest in real estate," states BuyRentKenya, a real estate company that connects people to properties. A number of real estate companies in Kenya have curated targeted marketing campaigns to Kenyans living in the United States with a view to having them buy into their projects. Peter Njoroge, founder and managing director of the US-based PeteandPete Investors, a business that assists potential investors in Kenya and abroad tap into equities markets in the United States, says the proposed tax will strain household budgets, reduce consumption and investment, and threaten one of Kenya's most reliable sources of foreign exchange. Housing, he says, will be one of the sectors that will be affected. "The greater impact would be felt by households in Kenya, where remittances are a critical source of funding for essentials such as education, healthcare, and housing," writes Njoroge. The Centre for Global Development report cited earlier includes independent research that shows that for "every one per cent increase in the cost of sending remittances, the amount sent falls by around 1.6 per cent" adding that with less cash flowing through their channels, cash transfer service providers may be forced to raise their charges and reducing the amount remitted further. Apart from the US levies, Kenya's financial institutions do charge for the cash transfer that, according to the World Bank, stood at 8.45 per cent by 2020. This, according to a report by the Kenya Institute of Public Policy Research and Analysis (Kippra), impacts funds available for investment purposes. "These elevated costs reduce the capital available for investment, discouraging diaspora investors from utilising their resources for productive investments," the report says. In 2023, the Kenya Kwanza regime established the State Department for Diaspora Affairs to, among other things, help Kenyans in the diaspora harness business opportunities back home.

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