Big Four agenda: Address barriers to affordable housing
To address the housing deficit in Kenya, President Uhuru Kenyatta prioritised provision of affordable housing under the Big Four agenda. However, the increased cost of doing business in the building and construction industry could derail this objective if not addressed.
The cost of land and manufacturing have remained high, making them among key obstacles to realisation affordable housing, even as investors clamour for low-cost building materials.
The high cost of production has an adverse effect on property development, slowing down efforts to make houses affordable. The cost of electricity is also among the major impediments hindering the ease of doing business and a major concern for manufacturers.
High taxes on various inputs has not helped much, with 16 per cent value added tax on petroleum products having a direct knock on effect on material for the construction industry. Construction requires massive energy, 90 per cent of which comes from fuel. It would be foolhardy to expect cheaper houses when it is diesel-powered vehicles that are being used to transport supplies and workers to and from sites. Excavators, bulldozers, cranes, dump trucks, concrete mixers and other heavy construction equipment run on diesel.
Consequently, the extra energy expenses are passed on to the buyer. The cost of land in Kenya, the highest in the region, compounds the challenges facing the industry, making projects even more expensive.
To cushion the sector, the government needs to seriously consider tax rebates, and incentivise construction material to spur growth. The country must also urgently take care of the little scope for innovation and value addition, forcing players in the sector to opt for imported goods and services.
The local market is flooded with construction products from as far as Turkey and China, which would otherwise be cheaper if sourced locally.
Other developing countries such as Ethiopia have cheap electricity and at a time Kenya is getting into pacts such as the continental free trade agreements, it poses a risk of unfair competition and influx of cheaper products from the region.
To achieve the affordable housing dream, local manufacturers must innovate and position themselves competitively by ensuring they work closely with local universities to innovate.