The Kenya Property Developers Association (KPDA held its first event of the year, the CEO breakfast which brought together different stakeholders in real estate. The seasoned industry leaders, experts and thought leaders brainstormed on the impact of government regulation on the industry. Auditor and taxation expert, Mohsin Adamjee, one of the panelists at the event, noted that the increase in capital gains which took effect in January has significantly affected people who are purchasing property for resale.
Adamjee mentioned that real estate stakeholders are seeking to have the Kenya Revenue Authority (KRA) introduce an indexation allowance that will eliminate the effects of inflation on capital gains tax. Although KRA takes into consideration deductions such as maintenance cost and legal fees, they do not factor in the effect of inflation.
Stakeholders at the event also addressed regulation relating to quality standards of buildings and construction. They noted that non-compliance with regulations has resulted in disastrous outcomes. The executive Director of the National Construction Authority (NCA), Eng. Maurice Aketch who spoke at the event noted that compliance with necessary regulations remains a challenge for many stakeholders. The regulator stated that only 20,000 of the 60,000 registered contractors in the country have valid licenses.
Eng. Aketch also commented on a recent survey by the NCA which showed that many developers do not comply with NCA regulations. “You do not have to walk to NCA offices to get a compliance certificate. Sit at the comfort of your home, open your laptop, visit our official website, and apply. It is free of charge for your information, but compliance is still at a worrying 40%,” Eng. Maurice Aketch MBS.
The Nairobi County Chief Officer, urban development and planning, Patrick Analo Akivaga who also graced the KPDA event reiterated that the government is working on enhancing compliance to regulation through digitization of processes. He also noted that Nairobi County is working on policies that will promote development of green and sustainable projects.
Akivaga revealed that one of the proposed policies by Nairobi County will involve giving density bonuses or planning gain for developers who comply with greenery regulations. The Nairobi County urban development boss also urged developers to adhere to the government requirement of having 10 percent of ground surface set aside for green areas.
Real estate alternative financing
The issue of financing in enabling regulatory compliance was also raised during the KPDA meeting. Some developers lack adequate financing to enable them engage professionals and follow due process in their projects. Business Partners International Country Manager, Michael Muthengi who also spoke at the event noted that different real estate stakeholders have come on board to provide alternative financing to developers.
Muthengi explained that Business International gives two financing alternatives to its clients which include 100 percent financing or being an equity partners and giving equity stake of up to 20M. The latter alternative provides an opportunity for organizations such as Business Partners International to work with developers who have challenges raising the deposit required by banks. Alternative financing is revolutionizing real estate by opening it up to young generations including millennials and Gen Zs.
The discussions and deliberations at the KPDA event are expected to promote compliance with regulatory requirements in the real estate sector, increase opportunities and promote sustainability. The event also provided an opportunity for stakeholders to network and brainstorm on how they can work together for the betterment of the real estate sector. Compliance with regulation and working towards sustainability are some of the action points for real estate stakeholders from the KPDA CEO breakfast event.