Tax incentives for developers of at least 400 cheaper residential units,
which come into operation this weekend, could make the lower income
housing segment the next big investment frontier in the real estate
sector. FILE PHOTO | NATION MEDIA GROUP
Tax
incentives for developers of at least 400 cheaper residential units,
which come into operation this weekend, could make the lower income
housing segment the next big investment frontier in the real estate
sector.
The Finance Act 2016 was signed into law by
President Uhuru Kenyatta in September, handing developers who put up the
units a corporate tax rate of 15 per cent, down from the normal 30 per
cent.
“Tax
has been a big expense hence increasing the costs incurred by
developers, which in turn discourages developers from developing low
cost housing,” said Cytonn Investments Management Ltd.
During
the Budget in June, Finance Cabinet Secretary Henry Rotich indicated
that those who construct at least 1,000 low-cost units would be eligible
for a tax break and would pay corporate tax at a rate of 20 per cent.
But later the government lowered the number of units to 400 after developers said 1,000 units target was too ambitious.
According
to Cytonn Investments, homes exhibitions events held this year indicate
most participants have been targeting the lower middle and low-income
housing segments.
This is mainly attributed to the enhanced tax incentives and poor performance of the high-end market.
“There
is a stagnation in prices in some high-end property due to too much
supply that had hit this segment of the market,” the firm said.
“The
lower-income housing segment is thus the next investment frontier for
the real estate sector as developers embrace it and the market gets
enlightened on the available products in the market through increased
advertisements and events like expos.”
New innovations
The
investment company expects healthy competition among market players as
they get to see new innovations and trends such as use of alternative
building materials such as prefabs.
Prefabs are
specialist dwelling types of buildings made off-site in advance, usually
in standard sections that can be easily shipped and assembled.
The
Kenya Bankers Association (KBA) Housing Price Index for the three-month
period ending September, showed that middle income apartments still
have the largest share of market transactions at 58.6 per cent, while
maisonettes and bungalows account for 24.3 per cent and 17.1 per cent of
total sales respectively.
They also had the largest number of transactions in lower and middle income markets.
“Apartments
in middle income areas such as Kiambu Road, Waiyaki Way, Lang’ata and
Ngong Road recorded a 3.4 per cent price change during the quarter
compared to high-end areas at 1.8 per cent,” KBA said.
KBA
added: “This can be attributed to their affordability and, therefore,
they are preferred by the low and middle income earners.
"The
slow rise in apartments’ prices in the high end areas is due to
relatively slow uptake indicating a possible oversupply in this market.”
No comments :
Post a Comment