The Nairobi City County government has objected to the Kenyan national governments’ 0.5 % charge levied on construction, arguing that it will scare away investors.
In a letter addressed to Charity Ngilu, the Cabinet Secretary for lands, housing and urban development, Nairobi Governor Dr Evans Kidero said the regulations were quietly prepared without consultations with the county governments.
“This levy affects the housing sector that falls within the jurisdiction of the county governments and it should have been prepared with our participation and concurrence,” said Kidero.
The National Construction Authority Act 2014 stipulates that a construction levy of 0.5% of the value of any contract for construction works which exceeds the value five million shillings will be payable to the National Construction Authority (NCA) by the owner of the works.
All owners must notify the NCA and submit the details of any contract or project which it has awarded to a contractor whose sum or value exceeds five million shillings for the purpose of payment of the levy.
The levy will have to be paid before the commencement of the contract works. However, the NCA reserves the right to consider the final value of the completed works and assess the amount of the levy afresh, and may thereafter, depending on the result of the assessment, request a further payment or refund excess to the owner.
The NCA may suspend, cancel or revoke the registration of a contractor who commences construction works for which the owner has not paid the construction levy.
“This levy is bound to impact heavily on housing as well as push the cost of providing urban technical services, which would in turn impact negatively on the ability of the county government to expand infrastructure services for socio- economic development,” said Kidero.
He noted that the Nairobi City County government, as well as other counties, is currently experiencing serious housing deficits and inadequacy of infrastructure. As such, this levy would go against the state’s obligation to provide citizens with adequate and affordable housing.
“There are already numerous levies and charges imposed on the housing and construction sectors and this latest move will only serve to discourage investment in the sector.” The Nairobi City County government has been trying to engage various potential developers to interest them in investing in large scale housing and other infrastructure projects in the county, including the Eastlands Urban Renewal project. Kidero believes that the construction levy will scare investors away.
The governor urged the national government to revoke the imposition of the construction levy as contained as he believes it will adversely affect investor enthusiasm and deny Nairobi residents the right to adequate and affordable housing and infrastructure.