Kenya’s Property Valuation Laws Set for Overhaul
By Kenya Alliance of Resident Associations
Published May 7, 2021
Kenya’s National Treasury is seeking to overhaul property valuation laws in a bid to determine new land rates and bring more property owners across
the East African country’s 47 regional administrative units known as Counties into the tax bracket.
In published tender documents, the Treasury seeks to hire a consultant to develop a draft national rating legislation to replace the outdated Valuation for Rating Act of 1956 and the Rating Act of 1963.
Treasury says the project is part of its efforts to enhance county governments’ own source revenue which hit four-year low of Sh32.49 Billion in 2017/2018 financial year before recovering slightly to Sh35.48 Billion in 2019/2020.
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“Outdated property legislations imply low coverage by valuation rolls and tax base of properties that are ratable which further undermines the property rates,” Treasury contends.
Treasury says best practice requires valuation rolls (a list of ratable properties showing owners, their addresses, locations of land, tenure, acreage and assigned value)to be updated every 10 years but this has never been achieved.
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The value assigned to a property determines the amount of rates to be paid and therefore the overhaul potentially sets stage for higher payments by property
owners given the rise in value over time.
Most counties are currently using valuation rolls based on outdated rating and valuation laws which cite entities that no longer exist such as “rating authorities.”
“This means that the valuations can be legally challenged hence the urgency to have a new legal framework that would correct these anomalies. In this
context, the quickest solution is to have legislation at the national level,” says Treasury.
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Property rate is a tax on the value of property, including land, and is usually assessed by a rating authority with help from a valuer.
The rates are the single largest owns source revenue for counties but it has been problematic to collect, condemning them to continually miss collection
targets.
Revenue from property taxes grew from Sh3.81 Billion or 12.5 percent of local collection in 2013/2014 to Sh6.2 Billion or 17.4 percent in 2015/2016, Treasury
analysis shows.
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Meanwhile, land owners in Nairobi City County will soon start paying higher rates after the local government at City Hall tabled a proposal that fixes the
charge to current asset valuation.
City Hall says new rates will be based on between 0.1 and 0.115 percent of the current value of undeveloped land, setting stage for costly levies.
Currently, property owners pay land rates at 25 percent of the unimproved site value based on the 1980 valuation roll, which City Hall reckons has seen it
lose on the appreciation of plots.
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Charles Kerich, Nairobi City County’s Lands and Urban Planning Minister, says property owners will start paying higher rates once the new valuation roll,
which is awaiting public participation, comes into effect.
Kerich says the new valuation roll has been submitted to the County Assembly, which will arrange for public participation.
“The County Assembly, after public participation, will come up with a figure of the percentage to be charged as rates on all ratable properties in the
capital,” Kerich says.
City Hall raised Sh1.97 Billion from land rates in the June 2018 – June 2019 financial year against a Sh4.84 Billion target.
