Kidero demands revocation of new construction levy

Politics and policy

Nairobi governor Evans Kidero at a past function. Photo/FILE 

By  KIARIE NJOROGE, gkiarie@ke.nationmedia.com

In Summary

• In the National Construction Authority (NCA) regulations dated June 3, Mrs Ngilu imposed a 0.5 per cent levy on developments valued above Sh5 million.The levy is payable to the NCA before works commence.
• This is expected to push up the cost of owning homes for the middle class.

Nairobi Governor Evans Kidero has demanded revocation of the recently imposed 0.5 per cent levy on new construction projects on fears that it will cripple major housing projects

 

In a letter addressed to Cabinet Secretary Charity Ngilu, Dr Kidero said the new levy will scare away investors at a time when the county is laying plans to deal with a crippling housing shortage in the city.

“There are already numerous levies and charges imposed on the housing and construction sectors and this latest move will only serve to discourage investment in the sector,” said Dr Kidero

“Nairobi city county government has been trying to engage various potential developers with a view to interesting them in investing in large scale housing and other infrastructure projects in the county including “the Eastlands Urban Renewal project” and this latest project will definitely scare them away.”

In the National Construction Authority (NCA) regulations dated June 3, Mrs Ngilu imposed a 0.5 per cent levy on developments valued above Sh5 million. The levy is payable to the NCA before works commence.

This is expected to push up the cost of owning homes for the middle class – with buyers of a house worth Sh5 million expected to pay up Sh25,000 more.

READ: New levy for developers of Sh5m houses

Dr Kidero added that housing is a county function but the devolved units were not consulted during the drafting of the regulations.

“This levy affects the housing sector that falls within the jurisdiction of the county governments and it should have been prepared with our participation and concurrence.”

Dr Kidero did not however indicate whether City Hall would seek to have the levy put aside by a court of law.

In May, the county signed two separate memoranda of understanding with Chinese property developers that would see them build 55,000 housing units in the county’s land in Eastlands.

The project, styled as a Public Private Partnership (PPP), is to commence in February 2015 and will see China Sichuan construct 40,000 apartments as China Railways builds the other 15, 000.

The housing sector in the county is already reeling from the high interest rates as well as the change in method of calculating building plans approval fee.

In the Finance Bill 2013, the county changed the method of levying the fee from a graduated scale based on area to a percentage of the development’s value (average 1.25 per cent).

The construction levy is also significant for the city which in 2013 accounted for 78 per cent of the value of approved building plans in the country according to the Economic Survey 2014.