Why building a home in Nairobi will now cost less
Real estate investors will pay less to acquire building permits in Nairobi after City Hall proposed a lower rate to ease the cost of construction.
A permit will cost 0.5 per cent of the total construction cost, down from the current rate of between one and 1.5 per cent, if the 2015 Finance Bill is passed.
The proposal will save developers and home builders thousands of shillings as they contend with a number of regulatory fees including those paid to the National Environment Management Authority (Nema), National Construction Authority (NCA) and the Mining ministry.
This means that investors building homes valued at Sh5 million will pay Sh25,000 to secure a permit, down from the current Sh75,000.
“A drop from 1.5 to 0.5 per cent of the development cost is beneficial to not only developers but also home buyers. That will be very positive,” said the HF Holdings group managing director Frank Ireri.
The proposed rate will be flat, a departure from the current one which is based on the size of the building.
The lower permit fee marks a departure from the recent trend that has seen multiple fees introduced in the real estate industry as investors pump in billions of shillings to cash in on rising home prices and rental income.
Nema imposes a minimum charge of Sh10,000 or 0.1 per cent of project cost for environmental impact assessment. The Mining ministry started collecting a two per cent royalty on construction materials; increasing the cost of quarry stones, concrete blocks, hardcore, ballast and sand.
Projects exceeding Sh5 million pay a construction levy of 0.5 per cent of the value of the contract to the NCA. The lower permit cost comes weeks after acting Lands and Housing secretary Fred Matiang’i asked authorities to reduce fees charged on real estate developers to boost investments in the property market.
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SOURCE: Business Daily