Kenyans warned of rent hikes, stalled housing if Finance Bill 2025 taxes pass unchanged

Real estate stakeholders have warned of severe unintended consequences, including rent spikes and stalled developments, if Parliament fails to amend “punitive” tax measures proposed in the Finance Bill, 2025.

According to the Association of Real Estate Stakeholders Kenya (RESA), the proposals, including the reintroduction of 16 per cent VAT on construction materials, the introduction of a 0.3 per cent annual property tax on urban homes, and the removal of key tax incentives, could derail the affordable housing agenda, scare away investors and disrupt millions of livelihoods connected to the property and construction sectors.

Speaking at a press briefing in Nairobi, RESA called on Parliament to urgently amend or suspend these measures, warning that their combined effect represents a policy shock to the property market with unintended consequences that will harm ordinary Kenyans, small and medium developers and the national economy at large.

Increase housing costs

Under the Finance Bill, 2025, construction materials that were previously zero-rated or exempt will now attract a 16 per cent VAT. RESA argues this will significantly increase housing costs and deepen Kenya’s annual housing shortfall, currently estimated at 200,000 units.

In addition, the Bill proposes a 0.3 per cent annual national property tax on urban residential homes, which would be charged alongside existing county land rates. RESA cautioned that this double taxation could lead to rent increases of up to 25 per cent, pricing out tenants and middle-income homeowners.

The Bill also seeks to remove the 15 per cent preferential corporate tax rate for developers constructing 400 or more units annually, as well as repeal the 100 per cent investment deduction for projects in Special Economic Zones and rural areas.

Further, it proposes reducing the period for carrying forward tax losses from an indefinite timeline to five years, a change that could seriously affect long-term infrastructure and housing projects.

RESA highlighted other tax system changes, including shortening the VAT refund period from three years to two, eliminating the ability to offset overpaid taxes against input VAT, and extending refund audits to 180 days.

Strain cash flow

The changes, RESA said, will strain the cash flow of developers, especially small and mid-sized enterprises, potentially causing difficulties in meeting ongoing costs and project deadlines.

Concerns were also raised about the National Rating Act 2024, which expands county government powers by broadening the definition of rateable property, requiring five-year property revaluations, and allowing enforcement actions such as property auctions for unpaid rates.

Despite the inclusion of a dispute resolution mechanism, RESA warned that the Act increases compliance burdens and fuels investor uncertainty.

Kenya’s real estate sector contributes over 12 per cent to the national GDP and directly employs more than 300,000 people.

Over two million livelihoods across related industries, including construction, finance, legal services, and transport, also depend on the sector. RESA warned that these legislative changes threaten not only the property market but the broader economy.

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• stalled housing if Finance Bill 2025 taxes pass unchanged

“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,” the association said.

RESA urged Parliament and the National Treasury to engage stakeholders in meaningful discussions, reconsider the proposed tax measures, protect incentives that encourage affordable housing and local industry, harmonise overlapping national and county tax regimes, and ensure tax refund systems support business viability rather than stifle it.

The association reaffirmed its commitment to working with government and private sector partners to uphold transparency, restore investor confidence, and promote ethical and sustainable development in Kenya’s real estate sector.