Win for First-Time Home Buyers as Stamp Duty Is Axed

First-time home buyers in Kenya were on Wednesday handed a major reprieve after President Uhuru Kenyatta signed changes to the Stamp Duty Act into law, which, among other things, spares them from paying stamp duty.

Through the Tax Laws (Amendment) Bill, the government has amended the Stamp Duty Act to exempt individuals buying their first homes from the tax that is ranked as a major expenditure in property acquisition.

The government reckons that stamp duty exemption will make it more affordable for young professionals to acquire houses.

Currently, the Kenya Revenue Authority (KRA) charges a stamp duty of between two and four per cent of the value of the property, piling financial pressure on first-time home buyers.

For instance, an investor buying a Sh15 million house needs to part with Sh600,000 as stamp duty costs – an amount that must be paid within 30 days of contract execution.

“Amendments to the Stamp Duty Act also include provisions to allow the Collector of Stamp Duties to refer a valuation of property for Stamp Duty to a registered and practising valuer,” the State House’s press office said in a statement on Wednesday.

Removal of the tax means that first-time home buyers will only meet other outlays such as valuation costs, lawyer’s fees (usually about one per cent of the purchase price), and a commitment fee to the bank.

A first-time buyer is defined as an individual or individuals who have never owned an interest in a residential property in Kenya or anywhere else in the world and who intend to occupy the property as their main residence.

It is however not clear whether the exemption applies to all first-time home acquisitions or just those under the State’s affordable housing scheme as was suggested by the Bill that was tabled in Parliament by the National Assembly Majority Leader Aden Duale.

“There shall be an exemption from stamp duty under this Act— the purchase of a house by a first-time homeowner under affordable housing scheme,” read the Bill.

Until Wednesday, property deals exempted from stamp duty included spousal property transfer, gifts to charitable organisations, and transfer of property in a will.

Others were transfers between associated companies and the handover of family property to a company that is wholly owned by family members.

Although the first-time buyer’s stamp duty exemption is a major relief to those seeking to climb the property ladder, observers see it as a double-edged sword that could potentially slow down the residential housing market.

“First-buyers are likely to hold off on making purchases opting instead to save for longer to maximise the full stamp duty exemption,” said Joram Kagechu, a Nairobi real estate agent.

Mr Kagechu said that even with the stamp duty exemption, the cost of buying a home is quite high for most first-time buyers – which means young professionals will still find it difficult to save for their deposit.

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