The Finance Bill 2026 is making its way through Kenya’s National Assembly, and for anyone with a stake in property — whether you’re a landlord, developer, investor, or aspiring homeowner — there is a lot to pay attention to. Unlike the highly controversial Finance Bill 2024 that was withdrawn following nationwide protests, this year’s Bill is more measured in tone, but it still carries significant implications for the real estate sector.
Here’s a clear breakdown of what’s in the Bill, what it means for you, and how to prepare.
1. Residential Rental Income Tax Goes Up: From 7.5% to 10%
This is perhaps the most directly felt change for landlords. The Bill proposes to raise the residential rental income tax rate from 7.5% to 10% of gross rental receipts.
This rate applies to resident landlords earning gross annual rental income of more than KES 288,000 but not exceeding KES 15 million — the bracket covered by the Monthly Rental Income (MRI) simplified tax regime. Importantly, this is a final tax, meaning no deductions for expenses are allowed.
What this means for landlords: The increase reverses a reduction that was introduced by the Finance Act 2023, which had lowered the rate from 10% to 7.5% effective January 2024. Landlords who adjusted their finances around the lower rate will now face a higher tax burden once again. There are also concerns that the increase could discourage voluntary compliance, particularly if landlords feel they are being incrementally squeezed.
Bottom line: If you collect KES 100,000 per month in rent, your monthly tax liability rises from KES 7,500 to KES 10,000 — an extra KES 30,000 per year.
2. A Brand New Tax on Non-Resident Landlords: 30% Final Tax
One of the most significant new introductions in the Bill is the creation of a formal Non-Resident Rental Income Tax. Foreign individuals and companies that own property in Kenya and earn rental income from it will now face a dedicated 30% tax on that gross income.
This tax will be treated as a final tax, meaning non-resident landlords will not be required to file further returns or claim deductions on that income. The Bill also introduces a simplified KRA registration system for non-resident landlords, who will be required to remit the tax by the 20th day of the month following the month in which rent is received.
What this means for the market: This formalises a tax obligation that has existed in principle but lacked a clear standalone framework. It could affect foreign nationals, diaspora investors, and multinational companies holding commercial or residential property in Kenya. Property managers acting on behalf of foreign landlords should take note — the Bill also includes provisions for resident agents collecting rent on behalf of non-residents.
3. A Major Win for REITs: CGT and Stamp Duty Exemptions
Not everything in this Bill is a burden. One of the most positive proposals for the real estate sector is the introduction of exemptions from both Capital Gains Tax (CGT) and Stamp Duty for transfers of property into a registered Real Estate Investment Trust (REIT).
Currently, transferring property assets attracts both CGT (at 15% of the gain) and Stamp Duty (at 2% or 4% depending on property type and location). These costs have historically been a barrier to the formation and growth of REITs in Kenya.
By removing these two tax hurdles, the Bill creates a meaningful incentive for property owners and developers to contribute assets into REIT structures, potentially deepening Kenya’s capital markets and making real estate investment more accessible to ordinary Kenyans through listed vehicles.
What this means for investors: If you are a property developer or large-scale landlord exploring institutional investment structures, this is the right time to engage a tax advisor on whether a REIT conversion makes strategic sense for your portfolio. This exemption is proposed to take effect from 1 January 2027.
4. VAT Exemptions for PPP Infrastructure Projects
The Bill also proposes VAT exemptions for the implementation of infrastructure projects under a Public-Private Partnership (PPP) framework. While this is broader than pure residential real estate, it has significant implications for large-scale mixed-use and infrastructure-linked developments.
Developers involved in government-linked housing or infrastructure projects may benefit from reduced input costs, potentially making such projects more financially viable.
5. Expanded Mortgage Interest Deduction
In a positive move for homeowners, the Bill proposes to expand the allowable deduction for mortgage interest by including interest paid to the Central Bank of Kenya for the construction, purchase, or improvement of a residential house, up to KES 360,000 per year.
This is a modest but welcome measure that reduces the income tax burden on individuals actively financing their own homes.
6. Broader Tax Changes That Indirectly Affect Real Estate
Beyond direct property taxes, two broader proposals in the Bill could ripple into the real estate sector:
VAT on Digital Payment Services: The Bill proposes a 16% VAT on fees charged by digital financial service platforms, including mobile money providers. Given that rent collection and property management payments increasingly flow through mobile money, this could add friction and cost to routine real estate transactions.
Shorter Income Tax Filing Deadlines: The Bill proposes reducing the deadline for filing income tax returns from six months to four months after the end of the tax year. Landlords and property companies will need to ensure their bookkeeping is more timely.
What Should Real Estate Players Do Now?
The Finance Bill 2026 is still undergoing parliamentary consideration and public participation. Now is the time to act:
- Engage the process. Public participation remains open. Property owners, landlord associations, and real estate industry bodies should submit formal input to the National Assembly’s Departmental Committee on Finance and National Planning.
- Review your rental pricing. If the rental income tax increase passes, you may need to revisit your rental pricing strategy — particularly if you are operating near the margins of the MRI threshold.
- Explore REIT opportunities. The proposed CGT and stamp duty exemptions for REIT transfers represent a rare and meaningful window for portfolio restructuring. Engage legal and tax advisors early.
- Ensure KRA compliance. The Bill signals the government’s continued push for compliance in the real estate sector. With KRA’s eRITS system already operational, landlords who are not yet registered should treat this as an urgent priority.
- Monitor the Bill’s progress. Provisions are subject to change before enactment. Proposed effective dates vary — most changes kick in from 1 July 2026, while others (including the REIT incentives) are set for 1 January 2027.
The Big Picture
The Finance Bill 2026 strikes a careful balance — it seeks to expand the tax base and improve compliance without the blunt, sweeping tax hikes that made the 2024 Bill so unpopular. For the real estate sector specifically, it is a mixed bag: resident landlords face a higher tax rate, foreign property owners gain a new compliance obligation, but REIT investors and PPP developers get meaningful incentives.
The direction of travel is clear: the government is tightening the net around property income while also, carefully, trying to attract institutional investment into the sector. For anyone active in Kenyan real estate, staying informed and proactive is no longer optional — it is essential.
Disclaimer: This post is for informational purposes only and does not constitute tax or legal advice. Please consult a qualified tax advisor or legal professional regarding your specific circumstances.
Sources: Kenya Finance Bill 2026, KPMG East Africa Analysis, Bowmans Law, Cliffe Dekker Hofmeyr, Afriwise, Tuko.co.ke
