The Architectural Association of Kenya (AAK) wants the State to extend incentives to professionals in the housing industry to realise the objectives of affordable housing. AAK chairman Steven Oundo said this would encourage construction of low cost housing as professional fees raise the cost of construction by a significant margin.
Oundo said the government should consider waiving VAT on low cost housing projects valued in the excess of Sh20 million. He said housing projects identified as low cost in the outset should be given such incentives so that the savings can be ploughed into provision of services. “When I’m charging professional fees, I also have to factor in VAT as well. But if the developer is able to reclaim the VAT, this would encourage development of more low cost housing,” said Oundo.
Urban areas across the country lack serviced land which includes provision of roads, sewer systems, water and electiricty – which contributes to the current scenario of high prices in the property market as developers pass on the cost to buyers. “This is the biggest problem. To get serviced land in a place like Kilimani for instance, you have to pay about Sh80-100 million. If you plan to build say 16 flats, it means each flat costs about Sh5 million on land alone,” he said.
He said there is need for a policy restricting subdivision of unserviced land until such is provided to ensure developments come up at reduced costs. He said a collaborative approach by all stakeholders in the housing sector would help cool the high prices. “The State also needs to offer other incentives such as mapped transport system and find permanent alternatives for cheaper electricity.
Right now we pay about three times what Egypt and India pay and this affects production of construction materials such as cement. “We need to strengthen the capacity to manufacture construction materials locally in large scale. With mapped transport such as commuter trains and designated buses, we’d have less cars on the road and lower rents out of the city,” said Oundo.
Cement producers say the commodity is set to rise further as production costs rise. Francis Leli, the marketing manager for East African Portland Cement, said the firm’s factory prices currently stand at Sh701 per the 50Kg bag. High transport costs mean developers further from Nairobi will pay higher for the same commodity.
The rising cost of borrowing has also seen lenders raise lending rates for mortgage loans, further dashing hopes of potential home buyers. Barclays Bank, which was offering among the cheapest loans in April at 11.9 per cent has already hiked the interest rate. The bank’s Head of Sales Charles Karanja said BBK is lending at 13.9 per cent for mortgages.