Affordable housing in Kenya: How it's going to work

The government plans to build 500,000 houses as part of it's affordable housing project. According to the affordable housing portal (Boma Yangu), this is how it is going to work.

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Kenyans will register and state the kind of house they want and in which county on the affordable housing portal. Right now the registration is to gauge interest and assess needs (what kind of houses people want).

Once you register, you'll get a unique identification number to use to make monthly contributions to the Housing Fund, managed by the National Housing Corporation (NHC).

Making contributions

You can make your contribution as:

1.   Statutory contributor – This is the mandatory contribution deducted by your employer from your salary (1.5%) and submitted to the Housing Fund every month. Contributions are capped at Sh2,500 per employee and employer per month.
2. Voluntary contributor – If you choose this option, you can contribute as much or as little as you want. You can withdraw these funds after five years for housing related activities or after 15 years or upon reaching retirement age (65 years). Your contribution will not be taxed at the time of withdrawal. If you choose to make voluntary contributions, you will not be able to access your money at any time. You will be subject to withdrawal rules (after five years for housing-related projects or after 15 years or retirement age).
3.  Joint contributors – This option allows you to make a contribution towards one house at a time with your husband or wife, but you can each choose to contribute individually. You can also do this jointly with other people towards one house. If you apply jointly, your incomes will be assessed jointly and the title of the house will be issued in the name of all the joint applicants.

You can monitor your contributions on the portal. If your income changes, the contribution made towards the Housing Fund will adjust proportionately to reflect the change.

Will my contributions earn interest?

Your contributions will earn a return every year, which will be announced based on the Housing Fund’s performance.

Allocation of houses

Allocation of houses will start when construction begins. Civil servants, the police and other members of the disciplined forces will get the first right to 30 per cent and 20 per cent of all available housing units, with the rest going to other Kenyans. The allocations will be computerised (done by an algorithm that sifts through profiles in the portal to prioritise those who need the affordable house most). If you don’t get allocated a house in the initial allocation, you will be put on a waiting list and given priority in the next allocation round. You can only buy one house under the affordable housing plan.

Factors to be considered in allocation:

1. When you registered (first come, first served)
2. Your income
3.  Family status (families will get preference)
4. Vulnerable groups
5. How much deposit you’ve accumulated through monthly contributions
6. Your assets
7.  Demand for your preferred type of house

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What kind of house do I qualify for?

The affordable housing scheme targets people in the following income groups (low and middle-income or people who earn less than Sh100,000 per month). The kind of house you qualify for will be based on your income.  

1.  Social housing – Kenyans who earn up to Sh19,999
2.  Low-cost housing – Kenyans who earn between Sh20,000 and Sh49,999
3. Mortgage gap – Kenyans who earn between Sh50,000 and Sh100,000

Those who earn less than Sh20,000 per month will be offered three options:

1.  One-room house at a cost of Sh600,000
2. Two-roomed house at a cost of Sh1 million
3. Three-roomed house at a cost of Sh1.35 million

Those who earn between Sh20,000 and Sh150,000 per month, will also get three options:

1.  One bedroom house (30 square feet) at a cost of Sh1 million
2.  Two bedroom house (40 square feet) at a cost of Sh2 million
3. Three bedroom house (60 square feet) at a cost of Sh3 million

You will be advised on the projected monthly rent-to-own payments based on the 3% to 7% per annum interest rates.

To ensure that those who qualify for social housing are the actual beneficiaries of the houses being built for them, the government plans to verify and register them in their communities. If there is more demand than supply for social housing, those who need affordable housing more will get priority.

How will I pay for the house?

Eligible Kenyans (those who earn less than Sh100,000) can buy the houses through the National Tenant Purchase Scheme (a rent-to-own model). What this means is that once you are allocated a house, you will be living in the house and paying “rent”, but in this case, that money goes towards owning that house, such that once you have paid for the full cost of the house, it belongs to you and you can stop paying rent. The mortgage or home loan will be offered at a fixed interest rate of 3% to 7% per year over a 25-year period. This means that your “rent” will not change/in the 25 years you take to pay for the house.

Monthly costs (service charge)

Apart from the monthly rent-to-own payments, you will also be required to pay an affordable service charge to a company contracted to maintain the facilities including the common areas and to fund major repairs of the housing complex. You will continue to pay the service charge long after you have finished to pay for the house.

What happens to those who earn above Sh100,000?

If you don’t fall within the above income groups (you earn more than Sh100,000), you will contribute to the Housing Fund (remember there are mandatory contributions for those who are employed, and you can also do voluntary contributions), but because you are not eligible to be allocated an affordable housing unit, you will have access to cheaper home loans from banks and Saccos through funding from the government’s Kenya Mortgage Refinance Company (KMRC).

You can also get your contributions after five years and use them for other housing-related activities, such as a deposit (down payment) for a mortgage, mortgage repayment or to improve your house.

 If you don’t claim your savings for housing-related activities, you can get them back after 15 years or upon attainment of retirement age. So say you earn Sh100,000 a month and you pay Sh1,500 a month (1.5%) for the Housing Fund, in five years you will have contributed Sh90,000 and in 15 years you will have contributed Sh270,000 (if your income doesn’t change).

If you contribute Sh2,500 a month, in five years you will have contributed Sh150,000, and in 15 years you will have contributed Sh450,000.

Tax relief

Those registered on the affordable housing portal are eligible for tax credit/relief equivalent to the amount contributed or the lower tax payable, up to a maximum of Sh9,000 per month. Self-employed Kenyans who are registered on the portal will also get tax relief, and both mandatory and voluntary contributions will get tax relief. For the employed, the deductions and tax relief will be handled at payroll. For the self-employed, you will get your tax credit when filing your taxes. First-time home owners/buyers will not pay stamp duty.

Who is building the houses?

The houses will be built by private developers, who will then sell them to the government, which will then offer the houses to Kenyans registered on the affordable housing portal. The government will provide land for building the houses, including in the counties, build access roads and the transport network, and set up infrastructure (electricity and water and sewerage). The housing portal will help in automated identification of the buyers.

Upcoming projects will be announced on the housing portal, in the newspapers, on radio and in Huduma Centre.

Rural areas

The government will support homeowners in rural areas to improve the homes they live in or to build new ones using locally-available quality building materials such as stabilised soil blocks. Already, 92 Appropriate Building Technology (ABT) centres have been constructed across the country, with a plan to have one in every constituency, then one in every ward across Kenya. Staff at these centres will offer technical assistance and equipment to members of the public to improve the quality of their houses. There will be Matofali machines, which are used for the manufacture of stabilised soil blocks, for hire. TVET colleges will also train members of the public on how to use cost-effective and environmentally-sustainable building technologies and how to modernise construction practices while preserving cultural values. Kenyans living in rural areas can apply for funding from the Housing Fund at 7% interest rate.

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Can I get a house if I don’t have a regular income?

Yes, but you have to prove that you are able to make regular monthly loan payments.

What if I am unable to pay the monthly payments?

The payment terms are designed to be affordable and flexible, geared towards helping you secure your home. However, every case will be looked at on a case by case basis. The government will engage insurance companies to develop home insurance products to cover home owners/buyers against losing their home if they lose their income/job. The cover will pay all or part of the monthly mortgage payment for a limited time, if a person loses their job involuntarily or if they lose income due business disruption, disability, hospitalisation, death.

Can I sell my house?

You will have to wait for eight years before you are allowed to sell the house. If you want to sell it before eight years have lapsed, you can only sell it back to the Housing Fund and retain the equity build-up i.e. the amount of your home you actually own, based on the amount of money you have already paid for it.

What happens if I die?

The house can be transferred to your next of kin.

For more information log on to:

 http://bomayangu.go.ke

http://www.housingandurban.go.ke/wp-content/uploads/2018/11/Development-Framework-Guidelines-Release-Version.pdf

How to file your income tax returns on iTax in ten easy steps

 When iTax was introduced a few years back, I was very clueless about it and after lots of frustrations trying to understand how to do it, I ended up filing manual income tax returns.

 Still reeling from the frustrations of the previous year, last year I paid someone to do it for me, but this year, I was determined to do it myself and to do it way earlier than June, so I got a friend to walk me through in April (thanks, Peter!) and discovered that it was a very simple process.

They say that the best way to get a lesson to stick, is to teach someone what you've been taught, and I have found this to be true these last few days while showing people how to manoeuvre the iTax system, and in the process, I have also learnt a lot.

I'm writing this post to be able to share what I have learnt and also as a point of reference for the coming years (sometimes memory fails me). This is in reference to filing income tax returns for 2015 in 2016, but it applies whichever year you need to use this guide. So without further ado, let me take you through the process of filing your income tax returns on the iTax system, with a bias on employed, unemployed/students and Kenyans who live abroad. Then I'll handle the FAQs in another blog post. Here we go:

Please note that all Kenyans over 18 are supposed to have a KRA PIN and are supposed to file returns every year, whether they have a job or not (yes, even students must file (nil) returns.) If you fail to file returns, or file them late (after the 30th June deadline), you will be fined Sh10, 000 or 25% of the tax due, whichever figure is higher.

THINGS YOU NEED

If you are currently employed, you need:

• P9 form – get this from the payroll/accounts department of the employer whom you were working for in 2015. If you had more than one employer in 2015, get the P9 forms from all the employers you were working for in 2015. If you are jobless, but you were working last year, get this from your 2015 employer.

• KRA PIN number – find it on your pay slip or ask your payroll accountant to tell you or get it from KRA by sending a scanned copy of your national ID and requesting for your PIN number. You can reach KRA through their iTax centres around the country, through Huduma Centres around the country, on Facebook or via email callcentre@kra.go.ke or telephone (020) 4999 999, 0711099 999.

• iTax website https://itax.kra.go.ke/

If you are unemployed and were still unemployed in 2015, you need:

• KRA PIN number – find it on your pay slips from your former job or get it from KRA by sending them a scanned copy of your ID and requesting for your PIN number.

• iTax website https://itax.kra.go.ke/

If you were not living/working in Kenya in 2015, you need:

• KRA PIN number – find it on your pay slips from your former job in Kenya or get it from KRA by sending them a scanned copy of your national (Kenyan) ID and requesting for your PIN number.

• iTax website https://itax.kra.go.ke/

STEP 1

Go to the iTax website https://itax.kra.go.ke/  and log in (Enter your PIN number and click continue, enter your password, do the calculation and get the correct answer and enter it in the relevant space [security stamp] then click log in). If you can’t remember your password, click on “forgot password/unlock account” and check your email for the new password. 

STEP 2

Once you log in, this is the page you will get.

If you were unemployed for the entire 2015 (January to December) click on “returns” on the red menu bar (circled in yellow) and choose the fifth option “File NIL return”. Fill in the dates: from 01/01/2015 to 31/12/2015 and the other relevant info except “wife PIN” (unless you are also filing returns for your wife), then click submit. You are done. Wait for next year to file nil returns again if you still remain unemployed the whole of 2016. If you get a job, even for a few months, you’ll need to file returns next year.

If you were not living/working in Kenya for the entire 2015, also file nil returns, just like the people who were unemployed.

If you were employed in 2015, whether for a few months or the full year, click on returns on the red menu bar (circled in yellow) and choose the first option which is “file returns”

If you have already filed 2015 returns, but you need to change something, click on returns on the red menu bar (circled in yellow) and choose the third option which is “file amended return”.

 

STEP 3

KRA has already filled the first two options for you, so just click on the drop down arrow on the third option “tax obligation” and choose the relevant choice. For most people that is the first option “Income tax – resident individual”. Click next.

Income tax – rent income option is for landlords who are paying tax on rent collected.

STEP 4

Download the Excel spreadsheet by clicking on it, it will open as a ZIP file. Double-click on the Excel spreadsheet inside the ZIP file to open it. Keep your P9 form at hand because you will need to fill the information on it on the Excel spreadsheet.

STEP 5

First things first, click on “enable content” on the yellow line at the top of the Excel sheet, so you can be able to fill in the form.

At the bottom, you’ll notice that there are six Excel sheets and the first one is the one you are on right now. It is called “basic info”. Fill in all the relevant details and scroll down to fill in the rest of the details if you have a landlord and if you have a tenant and if you are an auditor (most people don’t need/choose not to fill these landlord/tenant/auditor details). 

Please note that for every field you choose yes, a new sheet will appear at the bottom of the Excel sheet requiring you to give more details. You can only fill in the parts that are white and not the charcoal gray parts. Be sure to fill in every field marked with a red asterisk (*). When you are done with the “basic info” sheet, move on to the next sheet titled “F_Employment Income”.

 Keep your P9 form at hand because you need it to fill the remaining Excel sheets. This is how a P9 form looks. It is not usually blank, it usually has the figures you need to fill in the KRA Individual Resident Return form on Excel.

STEP 6

Keep your P9 form close. You need it to fill in the gaps on this sheet titled “F_Employment Income”. Fill in the PIN and name of your employer from your P9 form. Under “gross pay” write the figure you find at the bottom of “COLUMN D” in your P9 form. Most people don’t have allowances and benefits, net value of housing or pension in excess of 300, 000, so fill in zero (0) in those boxes and move to the next sheet titled “Details of PAYE Deducted”

If you had more than one employer in 2015, you'll have more than one P9 form (get them from the respective former employers, payroll department). Include the details from each employer in separate rows (You can add as many rows as the number of employers you had in 2015 and fill in the relevant details using the relevant P9 forms). 

  Please note that when you are filling the Excel sheets, you cannot "cut and paste" you have to fill in manually.

STEP 7

You still need to use your P9 form, so keep it close. 

Open the sheet titled “Details of PAYE deducted”. This is the third sheet on the Excel spreadsheet.

• Fill in the name of employer from your P9 form and the employer’s PIN number still from the P9 form. 

• Fill in taxable salary from the total figure you get under COLUMN H of your P9 form. 

• Fill in Taxable pay on taxable salary from the total figure you get in COLUMN J of the P9 form.

• Fill in amount of tax deducted (PAYE) from the total figure you get on COLUMN L of the P9 form. 

Remember to include details for all employers in additional rows if you had more than one employer in 2015.

Skip the next two sheets i.e. Skip “Advance tax credits” and “IT payments credits” and go to the last sheet titled “Tax computation”.

NB: You only need to fill “Advance tax credits” if you have a commercial vehicle and you only need to fill “IT payments credits” if you paid tax in advance, which most people don’t do. 

STEP 8

Still use your P9 form. 

Open the last sheet titled “Tax computation”. 

You only need to fill two spaces: “defined/pension contribution” and “personal relief”. 

• For defined/pension contribution, fill in the figure you find under COLUMN e2 on your P9 form. 

• For personal relief, for most people it is 13, 944 (which is 1162 multiplied by 12 months), so fill in 13, 944.

• If you worked for less than 12 months in 2015, take the figure you find under “personal relief” COLUMN K on the P9 form and multiply it by the number of months you worked i.e 1162 multiplied by the number of months worked, then fill in the answer you get under “personal relief” on the Excel sheet.

Once you are done filling in the two fields, scroll down and click “validate”.

If there are errors, you will get an alert. At the bottom of the Excel sheet on your extreme left, click on the red tab with the title “errors”. It will show you the errors, click on each and give the correct information, then when you are done fixing all the errors, go back to the last sheet titled “tax computation” and click “validate” again. You will get a message asking you if you want to generate a document. Click “yes”. The document (ZIP file) generates automatically and is saved on your computer under My Documents.

 

STEP 9

To finish, go back to the iTax website and log in again https://itax.kra.go.ke/, click “returns” >> file return >> fill the required info. The required info is: Type of return, return period 01/01/2015 to 31/12/2015, and then click on browse >> My Documents >> select the ZIP file you see ending in _ITR. Click open to upload onto the iTax system. Agree to the terms and conditions, then scroll down and click “submit”

 

STEP 10

Check your email for a notification from KRA, it is sent almost immediately. If the figure in the attached acknowledgment receipt is negative, KRA owes you (they'll pay you when they feel like, like after five years. They'll deposit the cash directly into your bank account, which you already filled in their form). If the figure is positive, you owe KRA. Pay them without delay.

Congratulations! You are done! Let’s do this again next year.

Remember you can file your returns for 2016 as early as January 2017, you don't have to wait till June (the last minute!)

NB: IF YOU REALISE YOU MADE A MISTAKE AFTER YOU HAVE ALREADY FILED YOUR RETURNS, YOU CAN AMEND/MAKE CHANGES/EDIT  >>>:

If after you finish filing your returns, you realise you made a mistake, worry not, you can change it, but do so before the 30^th June deadline. 

To amend your return, repeat the same process, log in to iTax >> click on “returns” >> then “file amended return”.

 Select the tax obligation “Income tax – Resident individual”. 

On the next page that opens, select return period “from 01/01/2015 to 31/01/2015”.

On “type of form to download” select “Excel” then click on download. You will be asked if you want to download the form for amendment, say OK. The Excel file you had filled in will download. Double click on it to open it. 

Click on “enable content” on the yellow line you see at the top. Then click on “amendment” at the bottom left of the page. You’ll get the Excel sheets with all the information you had already filled in; all you need to do is to change whatever you are changing, then go to the last sheet titled “Tax Computation” and click “validate”.

If there are errors, fix them and click “validate” again. Once you validate, you will be asked if you want to download a document (just like in STEP 8), say yes/OK and the document will automatically save in your computer on My Documents. 

Go back to the open amendment page on iTax and click on browse >> My Documents >> and select the new ZIP file (check on the time stamp on the right of the ZIP file to make sure it is the latest i.e. the amended form). Click “open” to upload, then click “submit”. You’re done amending.

 And that's it! You're done amending.