Businesses & Financial News

Housing recovery hinges on tax incentives 

By Steve Umidha

Kenya’s real estate market may not recover to the levels seen in the pre-Coronavirus era, unless the government steps in.

Stakeholders in the Built Environment are now recommending tax incentives be extended on certain raw materials if the sector is to shake off the pandemic butterflies.

Other than tax incentives, the Architectural Association of Kenya (AAK) in its report further wants the promotion of local content policy to be prioritized to cushion local developers from the advanced impact of the pandemic.

“We recommend that there is need for more support to the construction and real estate sectors to help them recover from the adverse effects of the COVID-19 pandemic.

Importantly, we are of the view that government support to the broader built environment sector through tax incentives and promotion of local content policy will help encourage more investments,” noted Arch. Wilson Mugambi, the AAK President.

Mugambi was speaking on Tuesday during the launch of the status of the built environment report for the period between January and June.

It is now feared that failure to offer the above mentioned sanctions, the sector may not hit its target for the year.

The construction industry is projected to grow by 4.5 per cent year-on-year this year as the sector recovers from the negative impact of the COVID-19 pandemic.

One year since the Covid-19 crisis shut down and warped so much of our lifestyles, things are still unpredictable, but the outlook continues to be bleak for the housing market. In fact, it looks like the perfect storm for a correction.

In the last six months for instance, the market has seen home prices overheating, with mortgage rates rising alarmingly.

The supply of homes for sale has been anemic and consumer confidence in the housing market has been falling since the first case was reported in March 2020. While pandemic-related mortgage bailouts are expiring.

Indeed, the cost of steel prices for instance, has subsequently affected the country’s construction industry, which heavily relies on steel production with the same being used for such functions as installation of reinforcing bars, manufacturing of heating and cooling equipment as well as internal fixture and fittings.

“The rise in cost of steel in Kenya has been attributed to the stringent COVID-19 restrictions measures undertaken for the better part of 2020 with manufacturers being forced to shut down operations,” reads the report in part.

Prices of construction metals have shot by up to 25 per cent in Kenya with a kilogram currently selling at Sh.125 up from Sh 85 in December 2020.

As a result of the rising costs, local manufacturers of steel products have increased prices of goods ranging from construction bars to galvanized sheets and steel tanks to reflect soaring metal prices in the global market.

“Our recommendations based on the report and the state of the industry is that priority needs to be given to local Professionals, manufacturers and builders with a focus on building capacity and resilience in the industry,” recommends the report.

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