Syovata Ndambuki

Every second Thursday of June, Finance Ministers of the East African Community member countries read their Financial Budgets. This year, on June 13th, Kenya’s Finance Cabinet Secretary, Njuguna Ndung’u tabled the government’s 2024/25 budget. 

Out of the the Shs. 3.992 Trillion budget, the CS proposed a Kshs 92.1 Billion allocation for the Housing, Urban Development and Public Works sector. This allocation is one of the biggest increments, compared to other key dockets like Healthcare and Roads which received smaller allocations, compared to what they got in the previous Financial Year. 

But how does the government intend to spend the Shs 92.1 Billion, given that Housing is one of the core pillars of the Bottom Up Economic Model? 

Division of the Bigger Pie

Before we dive into the Housing Budget, let’s first take a look at the bigger pie and how it’s been divided. Shs 1.628 Trillion of the 3.992 total budget will be going to recurrent expenditure within government ministries. This accounts for about 40.8% of the total budget. Shs 1.2 Trillion (30%) of this year’s budget will be allocated to Interest Payments and Pensions while Development Expenditure has been set at, Shs 745.9 Billion (18.9%). County governments will be receiving an equitable share of 400.1 Billion (10%) – a minor increase from last year’s allocation of Shs 385 Billion. Lastly, Shs 4 Billion (1%) will be going into the contingency fund. 

Though the projected expenditure for the Financial year 2024/25 is Shs 3.992 Trillion, the actual revenue is projected as Shs 3.343 Trillion, therefore creating a Shs 597 Billion deficit. Note that the Kenya Revenue Authority often falls short of its projected revenue collections, which might increase the deficit if this happens in 2024/25. In February, this year, the Business Daily Reported that KRA had only collected about 55% of projected revenue collections within eight months between July, 2023 and February. 2024.

Revenue Sources

When it comes to the revenue sources, the government expects to generate the Shs 3.343 Trillion primarily from Tax collections and Appropriations in Aid (A-in-A). A-in-A, refers to revenue sources such as grants, donations and loans. Income Tax is expect to generate most of government’s revenue at 36.8%, followed by Value Added Tax (VAT) at 24.3%. Excise duty comes in third at 12.8% followed by A-in-A at 12.7%. Import duty is supposed to generate 5.6% and other taxes will account for 7.7% of government revenue.

The Housing Levy, which was introduced last year through the Finance Act, 2023 and cemented in March this year through the Affordable Housing Act, 2024 makes up a significant chunk of income tax. The Levy, was introduced to support the Affordable Housing Program- a fact that explains the budget increments for this docket. So how will the government spend the Shs 92.1Billion?

Housing Budget Breakdown

According to the Budget speech delivered by the Finance CS, Shs 32 Billion will go into construction of Affordable Units and 3 Billion will be allocated to the Kenya Mortgage and Refinancing Company (KMRC). The 3 Billion disbursed to KMRC is supposed to enhance the company’s capital as well as cater to mortgages given out to primary mortgage lenders. KMRC’s mandate is to sell Mortgages to Banks and SACCOs at a wholesale interest rate of 5%. The banks and SACCOS then lend this money out to low and middle income borrowers at an affordable, single digit interest rate.

Affordable, Single Digit Vs Market Rate Loans

Shs 8.1 Billion will be allocated to the Kenya Urban Support Program an initiative sponsored by the World Bank. The second phase of this program was launched in May, 2024 and its main goal is to support county government in navigating the challenges that come with urban development.

Social Housing and Informal Settlements

Shs 15 Billion will go into construction of Social Housing Units. Though Social Housing is part of the AHP, Social Housing Units are different from Affordable and Market Rate Units. Social Housing targets lower income earners with unique payment structures and interest rates for those who borrow to buy these units. During the Affordable Housing Bill signing, the Lands CS said that buyers investing in social housing can pay as little as Shs 3,000 per month as contribution toward the unit and their mortgage interest will be charged at 3% and not the usual 9%.

The development of Social and Physical Infrastructure will be allocated Shs 14.7 Billion. Such infrastructure may include, schools, law enforcement institutions and healthcare facilities. Phase 2 of the Kenya Informal Settlement Improvement Project got Shs 11.3 Billion. The project’s goal is to improve living conditions in informal settlements through infrastructure upgrades and related initiatives. This project is, however, not to be confused with the Slum Upgrading Program.

Police Housing and Government Pool Houses

The National Police and Kenya Prisons got Shs 1 Billion for the construction of housing units for their officers. Construction of markets, and the Slum Upgrading Program got a similar Shs 1 Billion allocation. Shs 496 million will be used to construct Foot Bridges and Shs 444 million to support construction of County headquarters.

Though the CS’ speech does not capture allocation for maintenance of government’s pool houses, an additional document Titled Mwananchi, published by the treasury in accordance with the Public Finance Management Act mentions that Ksh 876 million will go into maintaining Government pool houses.

Developments in Konza City

Beyond the Shs 92.1 Billion Housing budget, the government has also set aside Shs 5.2 Billion for the construction of Konza Data Center & Smart City Facilities in Konza City. With growing internet activities, data centers are becoming vital hubs that enable us to process data without interruptions. An additional Shs 2.3 Billion has also been allocated for the Construction of Kenya Advanced Institute of Science and Technology (KAIST) still at Konza Technopolis.