State introduces incentives to spur growth in housing sector

By PATRICK GITHINJI

The Government has introduced incentives to drive growth and lower the cost of housing.

In an advertisement that appeared in a local daily, the Ministry of Housing said if the private sector is supported, they would have the capacity to invest more, particularly on low-cost housing.

"These efforts are geared towards boosting housing supply to the level where it matches demand," read the advertisement in part.

The incentives that the ministry outlined include tax deductibility for expenditures upon the construction of a social infrastructure.

"Expenditure of a capital nature incurred by a person on the construction of a public school, hospital or a social infrastructure and given prior approval by the minister for finance is tax deductible."

However, interest on income accruing from all listed bonds used to raise funds for infrastructure and social services are now exempted from tax, provided the bonds shall have a maturity of at least three years.

big demand

The sector is characterised by deteriorating housing conditions, which arise from demand that far surpasses supply, particularly in urban areas.

The annual housing demand in urban areas is estimated at 150,000 units, and a supply of 40,000 units per annum, resulting in a supply gap of approximately 110,000.

"This has mainly been due to low investment by the Government through exchequer funding, while the private sector has tended to concentrate on the development of housing for the high and middle-income people, yet it is expected to be the engine in the development of housing", the advertisement said.

Other incentives include exemption of VAT on construction or expansion of private universities and official aid funded projects.

The ministry further revealed that it would continue working with the stakeholders in the sector to lobby for more incentives aimed at enhancing development of affordable housing.