Kenya’s real estate industry has expressed strong opposition to proposed tax changes in the Finance Bill 2025 and the National Rating Act 2024, warning that these measures could jeopardize affordable housing initiatives, deter investors, and impact millions of livelihoods.
During a press briefing in Nairobi, the Association of Real Estate Stakeholders Kenya (RESA) urged Parliament to review or halt what it described as harsh and damaging tax proposals.
Among the contentious measures are the reintroduction of VAT on construction materials, a new annual property tax on urban homes, and the elimination of several key investment incentives.
RESA cautioned that these changes would cause a major disruption in the property sector, leading to adverse effects on everyday Kenyans, small and medium-sized developers, and the overall economy.
The Finance Bill 2025 proposes applying a 16% VAT on items previously exempt or zero-rated—such as materials critical to affordable housing construction. RESA argued this would significantly increase building costs and worsen the country’s annual housing deficit of 200,000 units.
Additionally, the bill introduces a 0.3% yearly national property tax on urban residential homes, which would be added to existing county land rates. RESA warned this double taxation could drive up rent by as much as 25%, placing further financial pressure on tenants and middle-income homeowners.
Other proposed amendments include the removal of a 15% preferential corporate tax for developers building 400+ units annually, and the repeal of the 100% investment deduction for projects in Special Economic Zones and rural areas. The bill also proposes limiting the carry-forward period for tax losses to five years from the current indefinite period—posing a challenge for long-term developments.
Further, the bill seeks to shorten the VAT refund claim window from three years to two, prevent offsetting overpaid taxes against input VAT, and extend the audit period for refunds to 180 days. RESA warned these changes would severely impact the cash flow of developers, especially smaller firms.
RESA also criticized the National Rating Act 2024 for expanding county powers by redefining rateable property, mandating five-year property revaluations, and permitting property seizures for unpaid rates. Although the Act includes a dispute resolution mechanism, RESA said it adds to compliance complexity and increases investor unease.
Given that real estate contributes over 12% to Kenya’s GDP and directly supports more than 300,000 jobs—with over two million livelihoods tied to related sectors like construction, finance, and logistics—RESA emphasized that these tax proposals risk harming not just the property market, but the wider economy.
The association called on lawmakers and the National Treasury to engage with industry stakeholders, reconsider the tax reforms, and preserve policies that support affordable housing and domestic enterprise. RESA urged the government to harmonize tax systems between national and county levels and ensure tax processes promote, rather than hinder, business sustainability.
“We need inclusive policy-making that balances revenue goals with long-term economic growth and job creation,” RESA stated.
The association reiterated its readiness to collaborate with government and private sector partners to foster transparency, attract investment, and promote sustainable growth within Kenya’s real estate sector.
