Property owners in major cities and towns face tough times ahead after the National Treasury approved plans by the Ministry of Lands to increase land rates and rents.
The move affects owners of rateable properties in Nairobi, Mombasa, Nakuru, Kisumu, Eldoret and Kiambu, who will be forced to dig deeper into their pockets to pay their taxes as the national government seeks to raise an extra Sh8 billion.
Lands Principal Secretary Nixon Korir told Parliament that the government currently collects Sh3 billion annually in land rates and rents, which were last reviewed several decades ago.
The country is using the outdated Valuation for Rating Act of 1956 and the Rating Act of 1963 that have denied counties billions of shillings due to the use of rates that do not match rising prices in the property market.
Prices of land and houses, especially in the urban centres, have been surging in recent years on growing demand but counties have been losing out on revenue due to the use of outdated rolls to compute the rates.
The National Treasury has allocated the Ministry of Lands an extra Sh150 million to carry out a review of land rates starting with the cities of Nairobi, Mombasa, and Kisumu alongside Nakuru , Eldoret and Kiambu towns.
Mr Korir told the National Assembly Committee on Land that the review of land rates is expected to generate an extra Sh8 billion with proper enforcement by both the national and county governments.
“The ministry has no capacity to enforce payment of rates every year. We only interact with the property owners when they transact on their properties. That is when they are forced to pay rates or rent,” Mr Korir said.
He told the committee that is chaired by North Mugirango MP Joash Nyamoko that county governments should impose an annual penalty for property owners who fail to pay land rates and rent. He said the ministry collected Sh832.6 million in rates against a target of Sh210.5 million in the year to June 2023.
On stamp duty, the ministry netted Sh5.8 million against a target of Sh11.2 million while stand premium on town plots generated Sh188.4 million against a target of Sh103.8 million.
Land adjudication and case fees amounted to Sh20,040 against a target of Sh26.7 million. Data submitted by Mr Korir shows that the ministry collected Sh4.9 million against a budget of Sh8.9 million from conveyancing fees.
Land valuation fees generated Sh6 million against a target of Sh55.4 million while the ministry collected Sh54 million from the land eegistration fees.
Property rate is a tax on the value of a property, including land usually assessed by a rating authority with help of a valuer.
The government has tabled the National Rating Bill, 2023 which seeks to empower the 47 devolved governments to seize and sell the property and land of rent and rate defaulters upon the expiry of a 60-day notice.
The Bill that is sponsored by Majority Leader Kimani Ichung’wah require the rates to be reviewed after every five years to ensure that they are charged at market value. It seeks to recognise county governments as beneficiaries in succession matters where there are properties with unpaid land rates.
It further seeks to provide a legal framework for imposition of rates on land and buildings by county governments. The proposed law also provides for the valuation of rateable property and the procedure for appointment and powers of valuers.
It is aimed at ensuring that the State does not lose out on the appreciation of plots. The county valuation rolls will be reviewed every five years. Treasury says best-practice requires valuation rolls to be updated every 10 years.
