Real estate sector warns of housing crisis if Finance Bill 2025 tax changes pass
The Association of Real Estate Stakeholders Kenya (RESA) urged Parliament to urgently reconsider or suspend several “punitive” tax clauses that, they say, could have far-reaching negative effects.
Kenya’s real estate industry has raised serious concerns over proposed tax changes in the Finance Bill 2025 and the National Rating Act 2024, cautioning that these could disrupt affordable housing projects, discourage investment, and harm millions of livelihoods tied to the sector.
The Association of Real Estate Stakeholders Kenya (RESA) urged Parliament to urgently reconsider or suspend several “punitive” tax clauses that, they say, could have far-reaching negative effects.
At a Nairobi press briefing, RESA highlighted that the Finance Bill proposes reintroducing a 16% VAT on construction materials, including essential items for affordable housing, which were previously exempt or zero-rated.
“The combined effect of these measures is a policy shock to the property market—with unintended consequences that will hurt ordinary Kenyans, small and medium developers, and the national economy at large,” RESA leadership warned.
They argue this VAT will raise construction costs, deepening Kenya’s already significant annual housing shortfall of 200,000 units.
Additionally, the Bill suggests a new 0.3% annual property tax on urban residential homes, adding to existing county land rates.
RESA warned this double taxation could push rents up by as much as 25%, putting homeownership and renting out of reach for many middle-income Kenyans.
The Bill also proposes scrapping the 15% preferential corporate tax for developers building 400 or more units yearly and repealing the full investment deduction for projects in Special Economic Zones and rural areas.
Other changes include limiting the period for carrying forward tax losses to five years and shortening VAT refund timelines, moves which RESA says will strain developers’ cash flow and delay project completion.
The association also criticized the National Rating Act 2024 for expanding county powers over property valuation and enforcement, including auctions of properties for unpaid rates.
Though a dispute resolution mechanism exists, RESA believes these provisions increase compliance burdens and heighten uncertainty for investors.
With real estate contributing over 12% of Kenya’s GDP and supporting more than 300,000 direct jobs and millions in related industries like construction and transport, RESA cautioned that the proposed laws threaten both the sector and the broader economy.
The association called on Parliament and the Treasury to engage stakeholders in meaningful dialogue, protect incentives that support affordable housing, harmonize tax regimes, and ensure VAT refund systems facilitate business sustainability.
“We call for inclusive dialogue that brings all stakeholders to the table. Policy should not just raise revenue—it must also enable sustainable growth and protect livelihoods,” RESA stressed.
The group reaffirmed its commitment to work with government and private partners to promote ethical, transparent, and sustainable development in Kenya’s real estate sector.
