NAIROBI, Kenya – President William Ruto’s flagship affordable housing programme has been dealt a potential blow after the National Treasury proposed to remove VAT exemptions on essential construction materials used in the project.
The change, included in the draft Finance Bill 2025, could significantly increase the cost of building low-cost homes, raising fresh concerns about the viability of the government’s ambitious housing agenda.
Currently, materials imported or purchased locally for exclusive use in approved affordable housing projects are exempt from value-added tax.
Developers apply to the State Department for Housing, and upon approval, the request is forwarded to the Treasury Cabinet Secretary for final clearance and implementation by the Kenya Revenue Authority (KRA).
However, under the proposed amendment, this tax exemption would be scrapped.
If passed by Parliament, developers would be required to pay 16% VAT on materials previously spared the levy, pushing up construction costs and potentially slowing the rate of delivery for housing units.
Currently, the VAT Act defines “electronic services” as services delivered through telecommunications networks, such as websites, software updates, and various digital broadcasts, including traditional broadcast television. ynews.digital/newsflash/fina…
The affordable housing programme, launched in 2018 during President Uhuru Kenyatta’s administration, was intended to address Kenya’s growing housing deficit by delivering 200,000 units annually.
Though embraced by the Ruto administration, the initiative has struggled to meet targets, despite being bolstered by public contributions through the 1.5% housing levy—matched by employers—introduced in 2023 and later formalized through the Affordable Housing Act 2024.
Removing VAT exemptions threatens to dampen developer interest and could slow momentum at a time when housing remains a politically sensitive and economically strategic issue.
The housing levy, initially introduced through the Finance Act 2023, was struck down by courts, prompting the government to enact a new legal framework to sustain the programme.
The Affordable Housing Act was passed in March 2024, and contributions resumed in July 2023 under the new law.
While the government has touted the housing plan as a cornerstone of job creation and economic stimulation, critics argue that increasing taxes on inputs will undermine affordability—the programme’s core objective.
With the Finance Bill now before Parliament, all eyes are on lawmakers to determine whether fiscal pressure will outweigh policy promises to expand access to dignified housing.
If the VAT change is approved, it would mark a significant shift in the government’s approach to incentivizing affordable housing and raise new questions about how the plan can remain financially viable for both developers and prospective homeowners.
The proposed amendment seeks to scrap Section 59A(1B) of the Tax Procedures Act, which currently prevents the KRA from demanding integration with business systems containing personal or sensitive customer information. ynews.digital/newsflash/cont…
