Big Changes Ahead for Real Estate & Construction – Finance Bill 2025 Highlights
A paper written by Brenda Musili, Legal Advisory & Compliance, JGA
The proposed Finance Bill 2025 is set to shake up Kenya’s real estate and construction sectors. From higher taxes to reduced incentives, these changes could make building and owning property more expensive, while slowing down investment and project development.
Here’s what you need to know:
- A key change is the reintroduction of 16% VAT on construction materials. Items like cement, steel, roofing, and interior finishes previously tax-exempt will now be subject to VAT. This move is expected to raise construction costs significantly, which may lead to increased rent and home/mortgage prices. Some developers might delay or scale down projects, affecting jobs and worsening overcrowding in urban areas.
For the ordinary mwananchi, this means potential contractual disputes where developers had based pricing on VAT-free inputs, particularly in ongoing or off-plan projects. Public-private housing partnerships (PPPs) could also come under financial strain, as budget forecasts may no longer be accurate. Such sudden shifts may also violate legitimate expectation for investors and could spark legal challenges, especially as the Constitution guarantees every Kenyan the right to affordable housing under Article 43.
- Another major proposal is a new national property tax—0.3% of a property’s market value, payable annually. For example, a home valued at Ksh 10 million will attract a Ksh 30,000 yearly tax, on top of existing county land rates.
This additional cost will likely be passed on to tenants, raising rent in urban areas. For homeowners, especially those in the middle-income bracket, it introduces fresh financial pressure.
- At the same time, key investment incentives are being scrapped. Developers constructing 400 or more units will no longer enjoy the reduced 15% corporate tax rate it will revert to 30%.
The 100% investment deduction previously available for rural and Special Economic Zone (SEZ) capital projects will also be removed. The result? Lower profitability, especially for large-scale and upcountry developers. This could reduce investor interest in underserved regions, slow down housing delivery, infrastructure development, and limit job creation.
- The Bill also changes how businesses handle tax losses. Currently, businesses can carry forward losses indefinitely. Under the new proposal, losses older than five years can no longer be used to reduce future taxes. This directly affects long-term, capital-intensive projects like estate developments and PPPs, making them less financially attractive.
- VAT refund processes are also tightening. The window to claim a VAT refund is being reduced from three to two years, and overpaid VAT can no longer be offset against future claims. Audits could take up to 180 days. For developers especially small and mid-sized firms this will strain cash flows and may delay or derail projects. It may also discourage participation in government housing schemes.
These changes raise fairness concerns, particularly where delayed or denied refunds hit businesses relying on VAT recovery to keep projects running. Small developers who counted on those refunds to finance works may now face serious funding gaps and project interruptions.
- The National Rating Act is also undergoing changes. Counties will gain powers to tax a broader range of properties, including those that were previously exempt such as low-cost housing, idle agricultural land, religious centers, and community or educational facilities.
Properties will now be revalued every five years. Combined with new enforcement powers, including penalties and property auctions, these measures increase the cost of holding property. Landowners unable to keep up with the payments or contest valuations could risk losing their assets.
In short: If the Finance Bill 2025 passes as it is, building will cost more, owning property will cost more, and investing may feel riskier especially for those involved in long-term or affordable housing projects.
Need help understanding how this affects your property or project?
Talk to us at Jukiwa General Agencies Ltd. We’re following these developments closely and can help you navigate the impact with clarity and confidence.
