Time will tell whether this will have a negative impact on housing development in Kenya. I personally think it will.

1. A good number of investors in this sector have bought property to rent. Imagine buying 2-2 bed flats at 9m. You get rent of 15K*2=30K less tax @30%. Is it worth investing 9million to end up with 20K per month ?. I see people rather putting their monies in other investment eg T/Bills etc where even with a rate of 9%, you are likely to end up with more than 50k pm.

Even without the income tax (which is only levied on NET INCOME after interest, maintenance, property taxes, depreciation, etc) the rental yields in many middle market areas were 6-8%.

2. People who still want to invest in properties will prefer areas where it is difficult for the tax man to touch them. So I am seeing more of mlolongo type of houses more than the elegant apartments coming up in Eastlands.

Why would it be that much more difficult for the tax man to tax mlolongo type of houses? A good register (takes time to build) of all land owned & what improvements are on it will help.

3. That rate of 30% is high. It should be graduated like PAYE but at lower rates to encouraged investment in this sector or even zoned. The pricing of flats/houses in Lavi, Kile, Runda is such that the investors may be able to pay tax but with rents of 5-28K in Eastlands, Ronga, Kitengela, Busia, Nyeri, Nakuru and other kenyan towns, I foresee alot of issues.

The tax is a percentage not a flat rate therefore a Landlord with 10 units at 5,000/- pays the same tax as another with 1 unit that yields 50,000/-. Please note I am discussing NET RENT after all allowable expenses.

4. If you borrow to buy a flat and then rent which majority do. Where does this leave you with the tax thing. The INTEREST that you pay the banks on 4.6m is well over 60K pm @20% interest. Yet your rental income is 15-18k. It is not much different when you borrow to build flat(s).

You are allowed to deduct interest from the GROSS RENT therefore you reduce your TAXABLE INCOME. Why would someone borrow at 20% to eran 15%? If they want to speculate on the rising prices then shauri yao. They should have reserves to cover the difference.

5. Most likely landlords will pass this tax to tenants. If you stay in middle class areas eg Langata, South B, Jamhuri, prepare to consider moving to Ronga, Kasarani, Eastlands, Kite etc

Supply & Demand. Landlords wil charge as much as the Market will bear. If you cannot pay the higher rent, the you will have no choice but to move. The Landlord has to find another Tenant. This is not 'free' to the Landlord. If he cannot find someone to rent at the higher rate then he will back down especially if he has interest to pay

If you pay 30k rent but you agree with the landlord that for tax purposes, the rent will be quoted at 10k or 8k [but you still pay him/her 30k] then what next? Will the government/KRA set minimum rents depending on the house?

This thing is just too easy to beat [for residential]. If a landlord gives you an option: Say you pay 30k and cough up an extra 9k in taxes or say you pay 8k and he coughs up the 2.4k taxes or you share it, which option will you take?

By the way, taxes will always be passed to the consumer!!! For those of you thinking that this burden is for the landlord, you had better think again! If you are a tenant, prepare to carry the burden or move to "vitongoji duni"! Habari ndiyo hiyo. These money is coming straight out of YOUR pocket!!!

Say I take a loan to finance a development, I pay interest on the loan. Will the interest be deducted first from the rent, before levying the 30%?

What about other costs - e.g. security, garbage, gardener, repairs?

If the net rental income (after deducting all related expenses) is what is going to be taxed, that is ok.

It is sad that after all the complaints on the forum regarding lack of services such as roads, streetlighting etc, by govt due to lack of funds, some would still recommend that landlords do not pay tax. Where will the money to provide the facilities and services come from? In countries like the UK, income tax on rental property is mandatory. Even those who live in their own homes (both urban and rural) pay a mandatory council tax of about GBP 130 (about Ksh17,000) per month. That is how they are able to maintain their roads, collect garbage etc. Those facilities in other countries that we always envy are paid for by their tax paying citizens.