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Page 2 / HOI1E ~ AWAY
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SIMPLIFIED RENTAL INCOME TAX
SYSTEM GOOD FOR LANDLORDS
T
he conversation about bringing land-
lords into the tax net has been going
on for a long time, with the taxrnan
merely paying lip-service. Focus was,
however, turned on landlords as the real estate
sub-sector shot out from under the shadows to
become one of the fastest growing sectors of the
economy. The sector is estimated to have grown
by 12 per cent between 2011 and 2015 alone,
contributing 7.5 per cent to the GDP in the same
period. According to a report by Oxford Busines
Group, in 2014, the construction was the best per-
forming sector, contributing 4.8 per cent of the
GDP. It even overtook the stock market as a pre-
ferred investment option.
The construction industry's substantial jump
in 2014 made it the best-performing sector that
year, owing primarily to attention paid to infra-
structural projects.
With all the noise, it was inevitable that the
taxrnan would pay special attention to rental in-
come. The tax regime, however, seemed to be
working against the Kenya Revenue Authority's
objectives with a computation process many
would find a problem following without hiring
accountants.
The simplified rental income tax regime KRA
finally adopted is easier and much more straight-
forward to compute without getting flustered. To
cap it all, once a landlord submits their monthly
returns, they do not have to do the annual returns,
unless they have other sources of income. With
this, it is hoped mote landlords will find it easy to
pay tax on their income.
That said, not many are aware of how they
would go about it, and it is this process we have
tried to break down with some help from KRA
publications. So, ifyou are a landlord, do not stay
in the dark. At the same time, it is important to
note that payment of rental income tax is not a
new thing and as such there is no justification for
landlords to raise rent under the guiseoftaxation.
H~~
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Thursday, July 21, 2016 / The Standard
newsnow
Develo1?ers upbeat following
scrapping of building levies
Construction work In progress at llavoko Park In Syoklmau, llachakos County. Developers have welcomed the re-
cent scrapping ofconstruction levies bythe National Construction Authority and Nema. lPHOTO:.WILBERFORCE OKWIRIJ
By MWAGHESHA MKALA
T
he government's recent
decision to scrap con-
struction levies charged
by the NationaJ Construc-
tion Authority (NCA) and National
Environment Management Authority
(Nema) was a prayer answered for
many in the real estate sector.
ment Authority). You have to pay
Nema for an environmental assess-
ment report and approval, and still
pay NCA some money. If you do not
have money for all these, the project
will stall from the onset," says Aaron
Gitonga, a property developer and a ·
director at Getso Consultant Limited.
by about six months. This means we
are incurring more costs than we had
estimated," Shah says, noting that it
was easier to start a business in most
neighbouring countries due to the
ease ofdoing business in those coun-
tries."
~·1 personally know many for-
eign investors who have come to do
feasibility studies but have to leave
because of government red tape.
Some have left for Ethiopia and oth-
er neighbouring countries, even as
they lament on the great opportunity
Kenya offers for their investments,"
he says.
During this year's budget speech
last month, Treasury Cabinet Secre-
tary IIenry Rotich said the govern-
ment decided to remove the levies
to reduce the cost of doing business.
Developers have been paying the
NCA 0.5 per cent of the total value of
construction projects worth over Sh5
million.
Real estate players say the scrap-
pingofthe levies was longoverdue. "If
you are planning to develop a proper-
ty, you need to pay statutory charges
to a number of bodies. They require
money but offer very little support in
return.
"You need approvals from the
county, when building next to a water
body, you have to get approval from
WARMA (Water Resources Manage-
Nairobi'sprime rents
down by 2.9 percent
He adds: "If onJy we could have
one consolidated authority and have
the fees paid once."
Nema charges a minimum of
Shl0,000 or 0.1 per cent of project
cost for impact assessment, following
a revision from a maximum of Shl
million in 2014.
Gitonga's sentiments are echoed
by Ashok Rupshi Shah, founder,
chairman and managing director of
Abacus Properties Consultants, the
firm behind the upcoming 200-acre
Infinity Industrial Park, off the East-
ern Bypass.
"I wish there was one dedicated
department in government where all
major investors could visit to get aJI
approvals at once. "
"There is too much back-and-forth
between us and many departments,
which has pushed our project behind
Firm breaksground for
Lukenya hostelsproject
Rising supply and falling demand re-
sulted in a 2.9 per cent decline in prime
residential rents in Nairobi tor the first
three months of the year. the Knight
Frank Prime Global Rental Index shows.
The index tracks the performance of lux-
ury residential rents across 17 key world
cities. In Nairobi, the index tracks prime
residential rents starting from Sh2SO.OOO
for apartments and Sh300,000 for
townhouses and stand-alone houses.
The top-end market segment is dominat-
ed by expatriate and corporate tenants
who pay out of their accommodation al-
lowances or are housed under corporate
arrangements.
Heri Homes has broken ground for
the construction of 300 hostels and 240
bedsitters targeting students of Daystar
University Lukenya campus. The project,
dubbed Hen Daystar Hostels, will cost
Sh3.5 million. The bedsitters will go tor
Shl.4 million while a one-bedroom unit
will fetch Sh2.2million. Already, 176 units
have been sold. The units come with a
swimming pool, Wi·Fi, counselling centre,
gym, backup generator and CCTV sur-
veillance. The project is expected to be
ready by June 2018. Hostels around the
area generate Shl0,000 to Shl5.000 per
month for bedsitters.
- Mkala Mwaghesha - James Wanzala
What does all this mean for the
two bodies? "Since the bodies wiJI
stop concentrating on revenue col-
lection, they will now be able to con-
centrate on their core business, which
is policing the sector," says Gitonga.
"This will also reduce corruption
within the bodies, especially among
field officers."
Accordingly, he says, it will be eas-
ier to start projects since the financial
burden will be less. There wiU be more
compliance with the Nema and NCA
requirements, he said.
weeklyroundup
Residentsof Nyerl's colonial
villages to gettitle deeds
Residents of 14 out of 220 colonial
villages in Nyeri will soon be resettled.
The resettlement process is to be pre-
ceded by a survey and issuance of title
deeds, which will start with eight colonial
villages. The survey and title deed Issu-
ance is funded by the World Bank. French
International Development Agency and
the Swedish International Development
Agency and is expected to take one year.
"Nyerl County has 220 colonial villages that
remain an impediment to development as
residents have no title deeds and cannot
develop their land." said Nyeri Lands and
Housing Executive Robert Thuo.
- Mkala Mwaghesha
.._