Stakeholders warn new tax proposals may hurt housing affordability and investor confidence
Real Estate Sector in Kenya Raises Tax Concerns Over Finance Bill 2025. A coalition of real estate professionals in Kenya has raised significant concerns over the proposed tax amendments in the Finance Bill 2025 and the National Rating Bill 2024, citing potential negative consequences on housing affordability, investment climate, and job creation in the property sector.
Real Estate Group Calls for Revisions
In a recent press briefing held in Nairobi, the Association of Real Estate Stakeholders Kenya (RESA) described the tax measures as “punitive” and urged Parliament to either amend or suspend key provisions in the proposed legislation.
According to RESA, the Finance Bill introduces new tax burdens that could undermine ongoing efforts to address Kenya’s housing deficit, which stands at an estimated 200,000 housing units annually.
Return of VAT on Construction Materials
One of the most contested provisions is the reintroduction of a 16% Value Added Tax (VAT) on construction materials that had previously been zero-rated or exempted under Kenya’s affordable housing framework.
RESA warned that this move would significantly raise the cost of building materials, reduce the number of affordable units being developed, and ultimately make it harder for ordinary Kenyans to access decent housing.
Proposed National Property Tax Sparks Alarm
The Bill also introduces a 0.3% national property tax on urban residential properties. This tax would apply in addition to existing county-level land rates.
RESA argued that the resulting double taxation could lead to rent increases of up to 25%, placing an additional burden on tenants and the middle-class homeowners who rely on rental income or shared housing spaces.
Real Estate Sector in Kenya Raises Tax Concerns Over Finance Bill 2025: Loss of Tax Incentives for Developers
Stakeholders also raised concerns about the removal of existing tax incentives. This includes the discontinuation of the 15% corporate income tax rate for developers who construct 400 or more residential units annually.
Further, the elimination of full investment deductions for developments located in Special Economic Zones and rural areas could discourage expansion into underserved regions, the association noted.
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Developers May Struggle With Tax Loss Limits and VAT Refund Delays
The Finance Bill also proposes limiting the carry-forward period for tax losses to five years, which RESA believes would affect long-term real estate projects that take time to turn profitable.
In addition, the shortening of VAT refund timelines could further strain developers’ cash flows and delay project completion.
National Rating Bill Expands Tax Scope
Alongside the Finance Bill, the National Rating Act 2024 is also under scrutiny for granting county governments expanded powers to revalue properties every five years and widen the scope of rateable assets.
RESA expressed concerns that this would increase compliance costs, create uncertainty, and possibly lead to forced auctions for rate defaulters.
While the Act includes a dispute resolution process, the group noted that the administrative burden and unpredictability of frequent property revaluations could further shake investor confidence.
Sector’s Contribution to GDP at Risk
The real estate sector contributes over 12% to Kenya’s Gross Domestic Product (GDP) and employs more than 300,000 people directly. RESA warned that the proposed tax measures risk destabilizing not just real estate, but connected industries such as construction, finance, legal services, and logistics.
Call for Inclusive Engagement
RESA urged both national and county governments to consult with stakeholders before implementing new fiscal measures.
“Tax policy should not merely be a tool for revenue collection. It must also support sustainable growth, investor confidence, and job preservation,” the association said in its statement.
Way Forward
The association reaffirmed its willingness to collaborate with the government and private sector in building a resilient, transparent, and inclusive housing ecosystem.
They called for the preservation of incentives that promote affordable housing, harmonization of tax policies between the two levels of government, and improved VAT refund mechanisms to support ongoing projects.
