How Much You’ll Receive After 7 Years of 3% Monthly Salary Deduction
On May 4, plans to expand the construction and supply of affordable housing in the nation took an encouraging detour when Treasury Cabinet Secretary Njuguna Ndung’u suggested a 3% deduction for all Kenyan employees.
Njuguna proposed changing The Employment Act, 2007, in Finance Bill 2023 to require workers to contribute 3% of their basic pay to the Housing Fund.
Similar to this, the company is required to contribute the same percentage to the employee’s Affordable Housing fund, a seven-year initiative.
“The Employment Act of 2007 shall be amended by the insertion immediately after 2007 Section 31A-Deductions into the National Housing Development Fund-of the new Section set forth below.” Cap. 117. 31B. (1) For each employee, an employer must make a contribution to the National Housing Development Fund established by Section 7 of the Housing Act.
“(a) The contribution from the employer is equal to three percent of the employee’s basic monthly income; (b) the contribution from the employee is equal to three percent of the employee’s basic monthly salary:
Part of Finance Bill 2023 said, “Provided that the sum of the employer and employee contributions shall not exceed Ksh5,0000 a month.”
The redesigned Ruto program aims to offer low- and middle-income individuals who lack access to mortgage financing affordable housing options.
One of the Big Four Agenda items of the administration of Retired President Uhuru Kenyatta was the Affordable Housing Programme, which fell short of its target of 500,000 affordable housing units by 2022.
President William Ruto did implement a number of measures to help the program, including tax incentives, subsidies, and collaborations with private sector developers, out of fear of yet another round of embarrassing failure.
Contribution Calculation
The Kenya Kwanza government set a seven-year maximum on the total employer and employee contribution at Ksh5,000 per month.
Mathematically, a sum of Ksh 5,000 per month for a year is Ksh 60,000. Only after seven years will the contributor get access to the money.
An individual employee will have saved Ksh420,000 after seven years.
Individuals must meet specific eligibility requirements in order to take part in the program, such as being a Kenyan citizen or a foreigner with a valid work permit, earning between Ksh15,000 and Ksh150,000 per month, and being registered with the National Housing Corporation (NHC).
Employers from all throughout the country will contribute to the Fund, which is managed by the National Housing Corporation (NHC).
Expert judgments
Okowa Nashon, a financial analyst, shared his opinions with Education News Arena, but in doing so he brought up important issues regarding the program’s feasibility, which will probably run into legal issues.
“If the government is serious about the Affordable Housing Agenda—which, in my opinion, it is not—then it should involve industry stakeholders in clear, practical solutions.
Okowa Nashon, Director of Beacon Africa Limited, asserted that these “armchair initiatives” will ultimately burden Kenyans and worsen their circumstances.
The Affordable Housing Programme in Kenya is an important step in alleviating the nation’s estimated 2 million+ unit housing shortage.
The government wants to raise citizen living standards, lessen poverty, and promote economic growth in the housing industry by offering low- and middle-income earners affordable home options.
The funds are then utilized to fund the development of affordable housing units and to offer qualified Kenyans mortgage credit.
Employees will have access to the funds to buy a home in the nation of their choice after seven years of contributions. Additionally, contributors have the option of applying for a mortgage through the Housing Fund, which offers financing of up to Ksh4 million with a 25-year repayment period.
The government wants to increase the number of affordable housing units available and encourage homeownership among low- and middle-income earners by combining resources from companies and employees.
Currently, Finance Bill proposed the deletion of a section of the Miscellaneous Fees and Levies Act, 2016 (MFLA) that allowed manufacturers to import raw materials and intermediate products at a reduced import declaration (IDF) rate of 1.5% upon the Commissioner’s recommendation to the Cabinet Secretary.
The Miscellaneous Fees and Levies Act of 2016 also allowed for the abolition of taxes on building materials used in affordable housing schemes upon the Commissioner’s proposal from the Cabinet Secretary in charge of housing-related matters.
The Miscellaneous Fees and Levies Act, 2016 (MFLA), which imposes taxes on products imported for the Affordable Housing Program, is completely repealed according to the Finance Bill 2023.
“With IDF applying at the proposed rate of 2.5 percent, manufacturers and players in the construction of affordable housing will face additional importation costs.”We observe that this action appears to run counter to the government’s plan to assist the value chain for building materials. We also anticipate that producers will pass along the increased cost.
How Much You’ll Receive After 7 Years of 3% Monthly Salary Deduction
