The government will start deducting 1.5 percent housing levy from all employees in the public and private sector beginning March 1.
Transport, Housing and Infrastructure Cabinet Secretary James Macharia said the affordable housing project will be implemented after successful talks with workers’ union and employers.
“We had injunctions that halted the process but the parties have agreed to withdraw them so we are ready to proceed with the project,” Mr Macharia said.
The Transport CS said the project will be launched in a few weeks and the first 2,000 housing units will be built on Nairobi’s Park Road.
Addressing concerns over the levy, he said that those who do not benefit from the housing project will get their money back at retirement.
“Those who do not get a house or already have one will get their money back when they retire. The only money that will not be refunded is the employers’ deduction,” Mr Macharia said.
SH57 BILLION
The tax scheme is expected to generate about Sh57 billion annually from about 2.5 million salaried Kenyans. Additional revenue is expected to come from voluntary contributors.
Although the initial plans projected the construction of half a million houses, CS Macharia said that local and international developers have expressed interest in putting up to a million units. The project is estimated to cost up to Sh1.5trillion.
“Actually one investor has expressed interest to fund 100,000 units. The project is no longer a vision but a reality,” Mr Macharia said.
Although the project will start off in Nairobi, the government will spread it to other regions, with Nyeri set to get 2,000 units.
Recently, the government agreed to allow contributors earning more than Sh100,000 to benefit from the housing scheme in a turnaround decision.
Those earning over Sh100, 000 will use their savings to get mortgages with annual interest of seven percent to buy the affordable houses.
At seven percent per year, the pricing of the mortgages is cheaper than commercial rates that charge double-digit interest rates.
COTU OBJECTION
Speaking in Nyeri on Tuesday where he was inspecting ongoing projects, Mr Macharia did not explain how the deal was reached with Central Organisation of Trade Unions (Cotu) who had filed a case in bid to stop the levy.
Cotu filed an urgent application in December last year at the Employment and Labour Relations Court challenging the levy’s legality.
Justice Hellen Wasilwa granted the request, halting implementation of the tax designed to fund one of President Uhuru Kenyatta’s Big Four agenda projects.
Cotu Secretary General Francis Atwoli faulted the scheme which the government said will be deducted from employees basic salaries and remitted to the National Housing Development Fund.
In his application to stop the levy, Mr Atwoli said the scheme was too heavy a burden for Kenyan workers in wake of rising cost of living.