# Financing (investment, rental, taxation)

## Enact New / Draft Legislation

* [Landlord and Tenant Bill 2021](../annex-f-laws-governing-financing-rental-taxation/35.-landlord-and-tenant-bill-no.-3-of-2021)- <mark style="color:green;">Consider the</mark> <mark style="color:green;">reintroduction of the bill into parliament and to fast-track its enactment. Furthermore,</mark> <mark style="color:green;">rethink the overall theme of rent control as a regulatory tool</mark>.&#x20;

## Review of Existing Legislation / Processes

* <mark style="color:green;">Demand and supply-side tax incentives</mark>- <mark style="color:green;">Simplify access to the various tax incentives provided in law and guidelines</mark>
* [Draft Affordable Housing Regulations 2024](http://www.parliament.go.ke/sites/default/files/2024-05/The%20Affordable%20Housing%20Regulations%202024.pdf) – <mark style="color:green;">Fast track adoption of the same.</mark>
* <mark style="color:green;">Review the Retirement Benefits (Mortgage Loans) (Amendment) Regulations, 2020 - Noting that these Regulations were quashed by the High Court in</mark> [_<mark style="color:blue;">Republic v National Assembly & 2 Others; Okoiti (Exparte); Retirement Benefits Authority (RBA) & 2 others</mark>_ _<mark style="color:blue;">(Interested Parties) (Judicial Review) (23 November 2022)</mark>_ ](https://new.kenyalaw.org/akn/ke/judgment/kehc/2022/15587/eng@2022-11-23)<mark style="color:green;">(Judgement) due to a flawed legislation process characterised by lack of public participation; the impugned legislations should be re-introduced in parliament and the laid down legislative process followed including sufficient public participation and stakeholder engagement. Simplify processes for amending Trust Deeds and applications for</mark> <mark style="color:green;">transfer</mark>
* Review [Housing Act 1953](../annex-a-laws-policies-regulations-governing-the-breadth-of-the-housing-value-chain/2.-housing-act-1953-cap-117-revised-in-2012) / [Housing Scheme Fund Regulations, 2018](../annex-f-laws-governing-financing-rental-taxation/16.-housing-scheme-fund-regulations-2018-legal-notice-no.-238-of-2018) (Legal Notice No. 238 of 2018)-  <mark style="color:green;">Promote an equitable regulation that encourages savings for housing</mark>
* <mark style="color:green;">Reintroduce incentives for home ownership savings plans</mark>
* <mark style="color:green;">Stamp Duty – Reintroduction of the stamp duty exemption for REITs on property purchases.</mark>

## Develop Regulations for Existing Legislation

* [Income Tax Act](../annex-f-laws-governing-financing-rental-taxation/17.-income-tax-act-cap-470)- <mark style="color:green;">Push for publication of regulations that will formally exempt subsidiaries of real estate investment trusts (REITs) from income tax to accord with section 20(1)(c) of the Income Tax Act.</mark>
* <mark style="color:green;">Develop and apply standards for credit assessments of informal workers who are not salaried and have irregular income.</mark>&#x20;
* [Sacco Societies Act](../annex-f-laws-governing-financing-rental-taxation/7.-sacco-societies-act-no.-14-of-2008)- <mark style="color:green;">Development of regulations to capture some gaps in the law governing the Guarantee Fund such as: documents needed by a member to lodge a claim; whether the compensation</mark> <mark style="color:green;">paid from the fund will take into account inflation arising as a result of protracted disputes before settlement/compensation; a gap on how to</mark> <mark style="color:green;">manage the funds in the Fund; create awareness on the Fund once established.</mark>
* <mark style="color:green;">Adoption of the Affordable Housing Regulations 2024 to give effect to the Affordable Housing Act.</mark>

## Support Implementation of Existing Legislation

* [Public Private Partnerships Act 2021](../annex-f-laws-governing-financing-rental-taxation/31.-public-private-partnerships-act-no.-14-of-2021) - <mark style="color:green;">Support the implementation and sharing of earnings</mark>
* [Sacco Societies Act ](../annex-f-laws-governing-financing-rental-taxation/7.-sacco-societies-act-no.-14-of-2008)- <mark style="color:green;">Set up the Central Liquidity Fund in the Sacco subsector to promote inter-borrowing among Saccos, deal with potential illiquidity challenges and become part of the national payment system.</mark>
* [Unclaimed Financial Assets Act 2011](../annex-f-laws-governing-financing-rental-taxation/20.-unclaimed-financial-assets-act-no.-40-of-2011) (Amended through Finance Act 2022) - <mark style="color:green;">Promote utilisation of penalty waiver to increase surrendering of unclaimed assets to the Authority. Promote reunification of assets with the beneficiaries by creating awareness and reducing the complexities.</mark>
* <mark style="color:green;">Support greater refinancing of mortgages by KMRC by studying the blockages currently faced, and collecting and disseminating data on demand served and type of supply to understand market dynamics and affordability</mark>
* <mark style="color:green;">Support implementation of tenant purchase schemes as an alternative to mortgages</mark>
* [Civil Servants (Housing Scheme Fund) Regulations, 2004](../annex-f-laws-governing-financing-rental-taxation/15.-civil-servants-housing-scheme-fund-regulations-2004)- <mark style="color:green;">Understand low disbursement (1,321 loans over more than 15 years) and demand segmentation</mark>

## Other non-legislative recommendations

1. <mark style="color:green;">Adopt a holistic approach to the macroeconomic environment in dealing with public policy issues such as public debt/borrowing. For instance, the lack of construction financing from local banks is partly due to poor offtake and the ease of investing in government paper at attractive and lower-risk returns compared to lending to housing;</mark>
2. <mark style="color:green;">Work to implement the various demand and supply side tax incentives provided for in law including but not limited to stamp duty exemption for 1st time home buyers, VAT exemption on construction inputs and corporate tax reduction for developers</mark>
3. <mark style="color:green;">Implement the National Tax Policy 2023 to deal with the unpredictable and uncoordinated taxation environment;</mark>
4. <mark style="color:green;">Create ring-fenced pools of funds from revenue sources like construction approval levies; the Unclaimed Financial Assets Authority funds etc. to invest into the housing value chain;</mark>
5. <mark style="color:green;">Adopt mechanisms for alternative credit scoring to provide access to credit for the very large informal sector in Kenya;</mark>
6. <mark style="color:green;">Provide incentives for investing in large portfolios of green and truly affordable rental housing as most of urban Kenya rents and in conjunction rethink or consider the place of laws which seek to impose rent controls as they may have the perverse and unintended effect of serving implicit subsidies randomly rather than to deserving tenants;</mark>
7. <mark style="color:green;">Promote the use of pension assets as collateral that increases access to mortgages by pension members (adoption of 2009 amendments), reconsider taxation on the transfer of pension assets into housing and provide guidelines for allowing a mortgage to simultaneously withdraw pension funds into housing (to enable 2020 amendments); simplify processes for applying for usage;</mark>
8. <mark style="color:green;">Support sharing of insights from portfolios of mortgages refinanced to KMRC, to enhance understanding of formal demand and supply;</mark>
9. <mark style="color:green;">Provide indexation (inflation adjustment) and predictability of rates applied in Capital Gains Tax on real assets, to encourage investment in affordable housing;</mark>
10. <mark style="color:green;">Provide incentives and legal recognition to small and local property developers who cannot deliver many housing units to enable them to scale or build capacity;</mark>
11. <mark style="color:green;">Consider doing away with the setting of minimum professional fees (scale) for relevant professionals such as lawyers, architects and engineers, which is arguably anti-competitive and increases house prices;</mark>
12. <mark style="color:green;">Prepare and publish enforcement regulations to enable subsidiaries of Real Estate Investment Trusts (REITS) to benefit from tax exemption in the Income Tax Act; consider allowing structuring of REITS as companies or partnerships;</mark>
13. <mark style="color:green;">Operationalize the SACCO’s Deposit Guarantee Fund and deal with the lack of specificity in the Sacco Societies Act (and no regulations) on documents needed to lodge a compensation claim; whether inflation is factored in compensation; and management of money/funds in the Fund as well as non-operationalization of the Central Liquidity Fund for the SACCO sub-sector.</mark>
14. <mark style="color:green;">Fast-tracking the implementation of the Risk Sharing Facility currently being explored by KMRC. The Risk Sharing Facility is a partial mortgage guarantee providing partial credit default loss protection to primary lenders allowing them to offer home loans to individuals with irregular income.</mark>&#x20;
15. <mark style="color:green;">With respect to REITs, the Capital Markets Authority should consider the review of the minimum threshold for assets at Kshs 300 million and Kshs 100million for I-REITs and D-REITs respectively to increase participation of SMEs and start-ups in REITS.</mark>&#x20;
16. <mark style="color:green;">Simplification of the approval process for registration of a REIT. This will improve efficiency and incentivise investment in REITs.</mark>&#x20;
