MPs have rejected the proposal by the Treasury to remove a 15 percent tax incentive for real estate developers and local motor vehicle assemblers in Finance Bill 2025.

The proposal seeks to amend the Third Schedule to the Income Tax Act to repeal the preferential tax rate given to companies engaged in the construction of at least 100 residential units annually. This means that the above entities will be subject to the Corporate Income Tax rate of 30 percent from the date of inception.

During public participation exercise on the Bill, stakeholders in the construction and vehicle assembly industries opposed the proposal, arguing that it would not only discourage investment, but also affect the competitiveness of Kenya’s automotive industry and raise housing prices.

The Finance Committee led by the Molo MP Kuria Kimani, agreed with stakeholders and proposed the deletion of the proposal to withdraw the 15 percent tax incentive for real estate developers, who construct at least 100 residential units annually and urged MPs to delete the two proposals.

“It would disincentivize investment in the real estate sector and result in a possible increase in housing prices especially for those under the affordable housing agenda due to higher developer costs,” the committee noted.

On the flip side, retaining this incentive will help keep up with the principle of predictability and stability in the tax system and help foster a more favorable business environment.

“This is in keeping with predictability and stability within the tax system and fostering a more favourable business environment,” the lawmakers say.

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