On 27th May 2025, the Kenya Property Developers Association (KPDA), in collaboration with its technical and advocacy partners including Tarra Agility Africa, presented its formal memoranda on the Finance Bill, 2025 to the National Assembly. The submission, which was led by KPDA Board Director and Chair of the Public Policy and Advocacy Committee, Sam Kariuki, Interim CEO Rose Kananu, and Technical Lead Marjorie Kivuva, was developed with substantive support from Tarra Agility Africa and sector experts. The delegation passionately advocated for the retention of critical tax incentives that underpin Kenya’s affordable housing agenda and spatial economic equity.
- Preservation of 15% Corporate Tax Rebate for Residential Housing Developers
Clause 28(b)(ii) of the Finance Bill proposes to delete the corporate income tax rebate granted to companies constructing at least 100 residential units annually a provision introduced in the Finance Act, 2016 and revised in 2023.
KPDA, backed by legal and economic analysis, strongly urged the National Assembly to reject this proposal. The tax rebate was designed to large scale private investment into Kenya’s housing sector, a sector facing a deficit of over 2 million units with an annual shortfall of 200,000. KPDA recommends extending access to Limited Liability Partnerships (LLPs), reducing the unit threshold to 50, and streamlining eligibility to make the incentive more inclusive.
From an economic perspective, real estate contributes over 7% to Kenya’s GDP and supports multiple value chains manufacturing, transport, construction, and professional services. The 15% rebate improves the post-tax return on investment, cushions developers against rising global construction costs, and provides long-term fiscal predictability, especially for capital intensive projects with 5–7-year horizons. Premature repeal of this incentive, which is yet to fully materialize its intended impact, could deter both local and foreign investors and disrupt housing delivery under the Bottom-Up Economic Transformation Agenda (BETA).
- Retention of VAT Exemptions for Affordable Housing Inputs
Clause 36(h) of the Bill seeks to repeal VAT exemptions for inputs used exclusively in the construction of affordable housing projects approved by the Cabinet Secretary. KPDA’s submission asserts that this exemption is not just a tax incentive but a constitutional tool to operationalize the right to housing under Article 43(1)(b). Since its introduction in 2019, this provision has helped reduce construction costs, particularly for critical inputs like steel and cement, directly impacting affordability for low- and middle-income Kenyans.
KPDA opposed the proposed removal of VAT exemptions on goods imported or purchased for exclusive use in constructing affordable housing. Kenya’s housing demand exceeds 250,000 units per year, while supply lags at 50,000 units annually. The association recommends not only retaining the VAT exemption but also decentralizing the approval process from the National Treasury to KRA or the State Department of Housing, to reduce bureaucratic hurdles.
Less than 5% of eligible developers have accessed the benefit due to current administrative bottlenecks. Removing this incentive would counter the objectives of the Affordable Housing Act, 2024, and SDG 11, ultimately making housing more expensive and investment less attractive in an already strained market.
- Protection of Regional Investment Incentives and Special Economic Zone Benefits
Clause 36(d) proposes deleting tax incentives for investments outside Nairobi and Mombasa as well as in Special Economic Zones (SEZs). KPDA warns that this move contradicts Kenya’s Vision 2030 and BETA objectives, which promote inclusive regional development. The association points to Kiambu County as a success story attracting substantial private capital and boosting GDP to over KES 550 billion through such incentives. The removal of these provisions risks re-centralizing investment in already congested urban centres and undermining economic equity. KPDA calls for the retention of VAT exemptions under paragraph 62 of the First Schedule of the VAT Act to maintain investor interest and support spatially balanced national growth.
These incentives align with international best practices, including those from East African peers and global institutions such as the World Bank and UNCTAD, which advocate spatial fiscal policy to address regional disparities. Repealing them would likely reduce private sector willingness to invest in underdeveloped counties, contradicting Kenya’s development agenda under BETA.
TARRA Agility Africa is proud to support KPDA’s advocacy on these issues and remains committed to advancing legal and fiscal reforms that enhance investor confidence and sustainable development across Kenya’s built environment.
