26 March 2014

Kenya: Counties Property Taxes Hurt Builders

Surveyors have warned that county governments' huge appetite for fat property taxes could slow down targeted property developments, the Institution of Surveyors of Kenya has warned. ISK on Monday said the astronomical adjustment of property taxes, by up to 200 per cent in some cases, could prove counter-productive as they will demotivate prospective developers.

While land and property rates are a major source of revenue for national governments worldwide, the surveyors said, counties' monumental tax increments are "baffling". "Majority of the counties have proposed high and punitive land rates with some increasing the rates by as high as 200 per cent," ISK chair Collins Kowuor said.

High property taxes will translate to higher sale and rental prices and hence deter potential investors in self-defeatist moves by counties, Kowuor warned. "The unsustainable charges coupled with rocketing land prices are likely to deter investors from the counties. This will make counties less competitive," he said.

A number of counties have been zoning out different areas for urban development with special focus on economically viable projects as they seek to lay foundation to stimulate take off. This has forced some like Kajiado to freeze land transactions pending a comprehensive verification of title deeds, review of transactional costs and process of building plans approval.

Machakos on the other hand is offering potential investors free land to eliminate middlemen, but also raising question over investments in public land.

Surveyors say counties face the risk of diminishing revenue flows, delays in bridging huge gaps in decent housing and limited access to development funds by landowners who could use land as a collateral.

"We have no objection to revision of property taxes by the county governments so long as they will be ploughed back into development projects," Kowuor said.

The governance issues on land and property investment are further exacerbated by an acute shortage of specialists. For instance, a recent study by the World Bank titled 'Securing Africa's Land for Shared Propsperity' found that there are less than 10 land surveyors for every one million people in the country.

The shortage impacts on the numerous ongoing property developments and and huge number of pending property cases before courts.

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