Category Archives: Kenya mortgages

Kenya Tax Changes in 2020

A look at some of the Tax changes that become effective on January 1, 2020, as a result of the Finance Bill 2019 that was signed by the President on 7 November 2019.

The highlight was the repeal of Section 33B of the Banking Act which had put an interest rate cap on commercial bank loans, but there are also other taxation clauses of note.

  • Import Declaration Fee levy has been increased from 2% to 3.5%. Also, the Railway Development Levy, which is an important component of paying for the SGR, has been increased from 1.5% to 2%.
  • Companies that list under the Nairobi Securities Exchange’s GEMS program for the next three years can be forgiven tax penalties and interest, provided they pay the principal amount. This move to encourage listing at the NSE became effective in November 2019. But if they delist within five years, that window lapses and all taxes due before listing will again become payable.
  • Taxes also go up for cigarettes, electronic cigarettes, fruit wines and spirits.
  • Motor vehicle excise taxes go up from 20 to 25% for cars over 1500 cc, and that for station wagons and race cars go up from 30 to 35%, but for electric-powered motor vehicles, that goes down from 20 to 10%.
  • Sports betting companies take another hit with a 20% tax lopped on to each bet amount, regardless of the outcome of the wager.
  • New economy taxes: The new year ushers in taxes on the digital economy market place – this encompasses “platforms that enable interaction between buyers and sellers of goods & services through electronic means” who are now liable for income tax and value-added tax (VAT). Along with that, a taxpayer PIN is mandatory when one is registering for a paybill and till numbers (to process mobile payments) through a telephone company
  • Real Estate Investment Trusts (REIT’s), which were exempt from corporate tax are now also exempt from income tax.
  • There is an income tax exemption for people who register under the Government’s Ajira Digital (online work) program from January 2020 to December 2022.
  • Green bonds: Interest income on all listed infrastructure bonds, or green bonds,that are a minimum three years to maturity will be exempt from income tax as will income on the National Housing Development Fund.
  • Turnover tax of 3% has been reintroduced and will be payable monthly by any business whose turnover does not exceed Kshs 5 million (~$50,000) in any year. EDIT – does not apply to companies already registered for VAT or those earning employment income rental income, engaged in management & professional services and limited liability companies. There is also a Presumptive Tax, a new tax that is 15% of the annual fee paid for a license e.g. to operate in Nairobi County and that can be offset when paying the turnover tax.
  • Environmental stuff: Plastic recycling companies will get a preferential corporate tax rate of 15% for five years and machinery and equipment used for plastic recycling plants are now VAT exempt. But, going the other way, equipment for the development of solar and wind energy, including batteries, which were previously exempt from VAT, now require the Cabinet Secretary for Energy to approve any such exemptions.
  • A taxpayer PIN is now mandatory when one is renewing membership in a professional body or with any licensing agency.
  • Mitumba and shipment consolidators are now recognized – if they have warehouses in the country of origin and Kenya, and have no history of dealing with substandard or counterfeit goods.

Meanwhile, the President said at the Jamhuri Day celebrations (on December 12) that a mortgage scheme he had previously proposed, and which entailed a deduction of 1.5% of salaries, would not be mandatory. Parliament resumes in February 2020 and we shall see if they amend that.

Extracts from reports done by KPMG East Africa, RSM Eastern Africa LLP and KN Law LLP .

Mortgage Refinance and Amendments to The CBK Act, 1966

Via a legal alert from Oraro & Company Advocates: The Finance Act, 2018 which was assented to on September 21, 2018, amended the Central Bank of Kenya (CBK) Act, 1966 to regulate Mortgage Finance Businesses (the business). The amendments include having new definitions and the introduction of new powers to the CBK. These amendments came into effect on 1st October, 2018.

New Definitions

  • A Mortgage Refinance Business is defined as the business of providing long-term financing to primary mortgage lenders for housing finance and any other activity that the bank may prescribe from time to time;
  • Mortgage Refinance Company means a non deposit-taking company established under the Companies Act of 2015 and licensed by the CBK to conduct mortgage refinance business;
  • Specified Mortgage Refinance Company means a licensed mortgage refinance company licensed under the CBK Act.

Increased CBK powers

With the introduction of new sections, CBK will now have the power to license and supervise the business. This includes:

  • Determining capital adequacy requirements;
  • Prescribe minimum liquidity requirements and permissible investments for the business;
  • Supervise the business by conducting both on and off-site supervision;
  • Assess the professional capacities of persons managing the business;
  • Approving the board management of the business;
  • Approving the appointment of external auditors;
  • Collecting regular data from the business;
  • Approving the annual audited accounts of the business before publication and presentation at the AGM;
  • Revoke or suspend a license;
  • Receiving reports from the Mortgage Refinance Business.

These are extracts from other documents from Oraro & Company with detailed implications of the passing and presidential assent of the Finance Bill 2018.

World Bank Reduces Kenya Economic Forecast

A new report from the  World Bank slightly revised down the forecast for Kenya economic growth from the 5.9% achieved last year to 5.5% in 2017. This is attributed to ongoing drought, depressed private sector growth, and rising oil prices while 2016 had low oil prices, tourism recovery, and favourable weather conditions.

At the launch, Central Bank Governor, Patrick Njoroge said the focus should not be on the rate change, but on the medium term in which Kenya’s economy had distinguished itself by its resilience. This comes from Kenya having a highly diversified economy  – a mix of largest export is tea but his tea, and that goes to Egypt (not the UK), the economy has a strong regional focus (25% of exports are to EAC, and 40% to sub-Saharan Africa), a dynamic private sector (that’s becoming more transparency, with good governance & better business models), a well-educated labour force and investments in infrastructure (he said more should be written about the SGR vs. the old lunatic express railway) which will improve the country’s competitiveness. He said that foreign exchange reserves were at an all-time high (5.3 months) and while rains had failed in 2017 and there was a slowdown in bank lending, the risk of Brexit to Kenya was more on foreign direct investment (FDI) side and less on exports.

At the launch, the World Bank also did a report on housing in Kenya titled unavailable and unaffordable that highlighted that there were fewer than 50,000 new houses being built each year compared to an annual demand for 200,000 homes. Also, there’s low financial participation with fewer than 25,000 mortgages in the country, yet mortgages are one of the most secure loans, as people do not default on their homes easily.

The World Bank proposes having a Kenya mortgage refinance company (KMRC) that adapts from other successful models in Malaysia, Morocco (guarantees for 70% of loans) and Nigeria (fully subscribed bond scheme) to see if the number of mortgages in Kenya can go up to 60,000. They also have a private-public partnership at Naivasha in Nakuru County to build 1,000 low-cost homes, most of which will be below Kshs 2 million (~$20,000)

Also see a report of an IMF staff visit to Kenya.

Real Estate Moment: TJRC, Homes Expo, Bubbles or Boom

TJRC: Two weeks ago, Kenya’s Truth Justice & Reconciliation Commission handed its completed TJRC Report to the President concluding three years of work in which the committee set out to document violations of human rights, abuse of power and misuse of public office since Independence and look at solutions that may be beyond the reach of the judicial system to addresses and restore.

They collected over 42,000 statements around the country and, at 41%, land and property issues topped their list of violations, far ahead of the next four issues (extra judicial killings, serious injury, persecution, torture) combined.

Homes Expo: The Homes Expo took place in Nairobi last week and some properties and exhibitors at the Expo included:

– AMS Properties has Five Star Gardens on Mombasa road with 2 and 3 BR apartments for  Kshs 5M and 7M respectively.
– Bluebell have 3BR apartments in Kileleshwa and Westlands for Kshs 18.5M and Kshs 24.5M  respectively
– The Cullinan will be full service apartments coming up next to Casabalanca in Kilimani/Yaya area and will have 1 bedroom apartments that range from Kshs 10M for 1 bedroom to Kshs 22M for 3BR ones
–  Imara Gardens on Mombasa Road have 2 and 3BR apartments at Kshs 6.8M and Kshs 7.8M respectively.
– Legacy Apartments being sold by Hass Consult are studio, 1 and 2 BR apartments on Naivasha road (minutes from the Junction Mall ) for Kshs 3.5M, 5M and 7.25M respectively ($85,300) 
– Peony Estate by Gao Yu comprise 100 homes with apartments that cost Kshs 17 million ($200,000) and Penthouses  for Kshs 30M in Lavington
– Victoria Villas are 4 BR houses in Kisumu for Kshs 10.5M

– Diani Homes have properties in Mombasa, Lamu, and Diani
– The Kenya Ministry of Lands has constructed 600 3BR apartments in Kibera – Soweto East 
– Anza and Pam Golding Properties (with an app in the android store) enable property sellers to show 360 view of their properties online for interested buyers. This eliminates an inconvenience when showing a proprty that is currently occupied by tenants
– Also at the expo were supermarkets like Tuskys and Nakumatt offering home furnishings and other companies like LG who displayed their Kshs 1.8 million 3D TV 
Financiers at the expo included
– Barclays has a 15.9% fixed rate mortgage for the first three years and maximum mortgage durations of 20 years. So a Kshs 10M ($120,841) mortgage attracts repayments of Kshs 138,000 ($1,662) per month
– CBA has 25 year mortgages in shillings, US dollars, Euros and Sterling Pounds
– Co-Op Bank has good home mortgages that range between 12.75% to 14.75%
– Family Bank has mortgages as low as Kshs 1M ($12,048)
– I&M mortgages are at 16%
– KCB give mortgages of up to 25 years for home buyers, while those for investments are up to 20 years. Real estate developers get finance for up to 2 years with 85% finance and investment groups get up to 19 years with 80% financed – all with loan rates starting from 13.5% up
– National Housing Corporation has 13% to individuals   
Standard Chartered has 14.9% mortgages and finance properties up to Kshs 100M ($1.2 million) and these are also available to expatriates and non-residents –e.g. to own a holiday or investment home

Other Real Estate Blogs

– Contrarian Kenyan advises why you should invest in REIT’s (Real Estate Investment Trusts) rather than in empty plots on the highway  as they offer better liquidity and diversity, but with less bureaucracy. 

– George Adulu  looks at common dilemma of many people who are paying rent in a house, but take mortgage land to build a home by borrowing to buy a plot of land to develop at some point in the future

– He also looks at the  buy to let  prospect of buying a property to rent out for income, but notes that, with the high interest rates, it only makes sense if you put down a sizable down payment, not the 10% that mortgage companies tease with. Also  if you are thinking about a property for purely rent income, then forget about the suburbs, instead head to densely populated parts of Nairobi and other urban centers. You will be shocked to know that hose single roomed units in those multi-storied buildings in Umoja, Dandora, Kayole, Embakasi and so on have a repayment period of less than 10 years.

Other Real Estate News

– Bad Debts : The construction, building and real estate sectors topped the list of sectors with biggest loan defaults in the first quarter of the year.
– Construction Jobs: The construction sector generated new jobs at the fastest pace in the five-year period to 2012. 
– Listed Property Company? Home Afrika plans to list on the Growth Enterprise Market Segment (GEMS) at the Nairobi Securities Exchange. The firm, with 128 shareholders, has projects under construction valued at over Kshs 12 billion such as Migaa (golf estate in Kiambu) Lakeview Heights (Kisumu), Llangwe (Kwale) and Kikwetu (Machakos) financed through shareholder funds and loans
– Succession:The Delamere Family is subdividing a Naivasha Estate as part of a succession plan involving grandsons of the settler farmer. 
– Unaffordable Homes: Owning a home in Kenya has become harder owing to the cost of finance. Still ccommercial banks had Kshs 122.2 billion ($1.5 billion) worth of home loans held in 19,177 accounts. (19,000 mortgages in Kenya)


The Kenya Banker’s Assocation CEO Chat series in May 2013  featured (PDF) Barclays Kenya CEO Jeremy Awori, and it focused on mortgages (PDF) 

Strathmore University has a course on Construction Project Management in June and another for Real Estate executives in July 2013.

Real Estate Moment: Property Expo, Bubbles, Mortgage Rates

A Homes expo took place  last weekend at KICC. Around that, other real estate matters include:
Mortgage rates down: The launch of the quarterly HassConsult property report showed  that the average mortgage interest rate in Kenya is now 19%, down from 22.5% three months ago. 
A Diaspora SACCO was launched with a view towards investing in real estate.
Aground breaking was held for the recently announced next phase  of the Nairobi Business Park which will comprise 15,000 Sq.M of space for restaurants, a fitness centre and convenience stores. At the event, Mugo Kibati the Director General of Vision 2030 said that the property industry accounts for 5.3% of Kenya’s GDP.
Exotic Marketing: Recognizing a challenge that homeowners face by moving further from the city, some developers now advertise themselves in terms of proximity to essential service centres. e.g. Olive Tree apartments [3Br for Kshs 7M] on Kiambu Road list about 5 schools, a mall, hospital and bus stop near the complex.
Kahawa – by @TheMumbi
Others advertise their properties on trucks, on large roadside billboard, in bank halls, have scheduled bus tours for prospective buyers to view the upcoming properties, or send out targeted promotions aimed at the ‘laptop and latte’ class [“Legacy Apartments (starting at Kshs 3.95M in the Dagoretti area] or proximity to high altitude [Serene Valley Properties, Sigona Valley – 3 and 4 bedroom villas in three different house designs costing between KShs 16M – 19M.

Land Bubble: According to an A4Architect Q&A, construction costs have not changed much it it’s land prices that have. Elsewhere they note an infrastructure effect on land prices which can be as much as 1,000% compared to 100% for other land prices over a short period. 

Coast Concern:
However at the Kenya Coast, it seems to be the other way as  land issues are among the key grievances that have resulted in unrest and recent attacks on police and politicians.

Expo: Using a 3 bedroom apartment or 3 bedroom house for comparison and with the US dollar exchanging at about 85 Kenya shillings, some properties and exhibitors at the Expo included:

Home Expo, Nairobi October 2012
– The Prism (model drawing below) by Kings Developers will be a new office block on one of the  Ngong Avenues in Upper Hill
– Dara Springs by the China Young Tai Co has 3BR Apts in Kileleshwa for Kshs 17M and they are also developing 6BR townhouses at Karen Splendour to sell at  Kshs 95M
– Imara Gardens are 3BR Apts in Imara Daima for Kshs 7.8M

– Edenville in Kiambu from HassConsult has 3BR Camellia Villa’s for Kshs 13.5M
– Chania Gardens in Thika have 3BR maisonettes for Kshs 8M
– Sahara Ridge in Ruiru have 3BR maisonettes  for Kshs 9.5M at Hass Consult
– Canary Springs are 3BR Apts in Ruaka for Kshs 7M 
– GreenPark Estate from Superior Homes  (winner of Best Development in a 2007 International Property Award)  is a managed estate
– Lukenya Hills have 3BR bungalows for Kshs 6M in Mlolongo, by SJR who put up the Safaricom headquarters buildings
– 360 Degree Court are apartments in Syokimau for Kshs 5.5M by Kings Developers

– Jacaranda Gardens off the Northern Bypass are 3BR Apts for Kshs 7.6M – built by the Sietco & the Chengdu Jiangong 3rd Investment Company
Out of Nairobi
– Milimani Apartments in Nakuru by Kings Developers have  3BR Apts for Kshs  4.5M
– Konza  ½ acre plots for Kshs 2M from Petu Properties and these are 11 Kilometres from the Malili technology city which, along with Tatu City (on Thika Rd), are two new cities planned to be built near Nairobi

– Investment & Mortgages Bank
– KCB’s Savings & Loan has finance of  13.5% available up to 25 years for ready built or for construction of homes. A Kshs 8.5M (~$100,000) home will attract monthly repayments of Kshs 195,000 over 5 years or Kshs 99,000 (~$1,160) if paid over 25 years.
– National Bank  has mortgages of up to 20 years at 15%, with up to 90% finance.
Planned Prism Tower
– Standard chartered has mortgages at 14.9% and a Kshs 8M loan can be repaid over 5 years at Kshs 189,000 or Kshs 104,000 (~$1,220) per month over 20 years.

The Mortgage Company (TMC) is a mortgage broker that help home buyers source loans from different banks. TMC, with it’s partners Oaks Construction and Rafiki Microfinance also has a  makazi mema program that aims to  finance and construct houses within 6 months for maisonettes (and bungalows in 4 months) with the building cost of a 3BR home being about Kshs 2.4M ($28,000)
Savannah Cement is the sixth cement company in the country – and they have two brands of cement, one of which costs Kshs 670 ($7.90) for a 50Kg bag 

The Kenya Revenue Authority had at the stand there. Their brochures note that property owners in the Diaspora who rent our property in Kenya are meant to pay income tax in Kenya on their rental income.