You could start parting with 1.5 per cent of your gross salary from the end of this month to fund the affordable housing programme, adding yet another statutory deduction on your income.

This revelation comes as the government moves to set up the National Housing Development Fund, which kicks off the programme anchored in the Big Four agenda.

Housing and Urban Development Principal Secretary Charles Hinga said yesterday Kenya Revenue Authority (KRA) is expected to communicate to employers the onset of deductions “anytime”.

The development comes after the government and the Central Organisation of Trade Unions (Cotu) agreed on an out-of-court settlement on the matter, where the national trade union had petitioned the Employment and Labour Relations Court to suspend implementation of the tax.

In his petition, Cotu Secretary General Francis Atwoli had argued that there was no public participation in the plan, which he also termed unconstitutional and amounted to double taxation.

Justice Hellen Wasilwa issued interim orders on December 19, last year suspending the levy. Last month, she extended the orders to give the parties involved more time to reach an out-of-court settlement. The matter came up for mention on April 8.

In January, Federation of Kenya Employers also obtained orders barring the government from establishing an advisory board to run and manage the fund.

Litigation challenges

“We have had some litigation challenges but those are behind us now. There are still other court cases that we are working on but this one was damaging because they had put an injunction on the implementation,” Hinga told People Daily on the sidelines of the sixth annual East Africa Property Investment Summit in Nairobi.

“We have agreed with Cotu. We are now waiting for KRA to give notice to employers when they will start deductions. It could be from end of this month, but let’s not jump the gun because the institution that collects taxes is KRA so they need to signal that they are ready but on our side we are ready,” the PS added.

The development means the housing levy joins the list of other statutory levies that include Pay-As-You-Earn (PAYE), National Social Security Fund (NSSF) and the National Hospital Insurance Fund (NHIF).

Under the housing Hind regulations, employers will contribute 1.5 per cent of the employee’s monthly basic salary while the employee will part with a similar percentage.

The levy, however, is capped at Sh2,500 for individuals earning a basic salary of Sh166,000 and above, which is the same ceiling for employers. “The taxation is for everyone,” a KRA official told People Daily on phone.

Transport CS James Macharia added: “Everybody will give out 1.5 per cent of their salary. There is no minimum wage but there is a maximum.”

Individuals qualify for a tax relief under the Income Tax Act, which will see them get back their contributions.

“There is no decrease on your take home pay if you get tax relief,” Hinga explained.

The government is keen to fast track operation of the National Housing Development Fund as it moves to entice private developers to put up affordable houses.

However, developers warned on Wednesday that the government’s plan to deliver 500,000 affordable housing units by 2022 could slowdown, citing delays in putting in place prerequisite structures to support off-take, which includes the fund.

Guaranteed returns

“Private sector can only put up houses if they are guaranteed of returns,” Architectural Association of Kenya President Emma Miloyo said.

Property management firm Knight Frank warned developers might shy away from the affordable housing programme if the cost of developing them is high.

“To make housing truly affordable, construction prices have to come down,” said Ben Woodhams, Knight Frank managing director.

But Hinga assured developers of incentives which include zero rating of construction material, removal of Value Added Tax and making arrangements with manufacturers to avail construction materials such as cement at cheaper prices. “We have submitted the list of incentives to National Treasury. We want to zero rate some of construction material and offer tax rebate,” Hinga said.

Government targets to collect between Sh6 billion and Shl8 billion monthly through the levy and has set up an online platform — bomayangu.go.ke — to enable individuals to register and book units.

During his State of the Nation address on April 4, President Uhuru Kenyatta confirmed that at least 175,000 Kenyans have already registered on the portal.

“These Kenyans will undoubtedly be first in line for the allocation of houses,” he said, “ We are now on track to deliver affordable housing to Kenyans.”

National Co-operation Housing Union (NACHU) yesterday said private sector is ready for the projects.

“They are just waiting on the government to sort out the procurement processes ,” Finance Manager Stanley Ndung’u said during the summit.

175,000 Number of Kenyans President Uhuru Kenyatta said have already registered on bomayangu.go.keportal

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'We are now waiting for KRA to give notice to employers when they will start deductions —Hinga