Inside Treasury's calculation on Ruto's stamp duty waiver

President William Ruto’s plan to scrap stamp duty on land transactions valued at Sh1 million or less could save ordinary buyers up to Sh40,000 per deal. However, the relief comes at a time when the cash-strapped government is already struggling to collect property and rental taxes.

Speaking in Eldoret on Tuesday, President Ruto announced that the National Treasury will exempt land sales below Sh1 million from stamp duty while introducing higher, progressive tax rates for luxury and high-value real estate transactions.

“...the National Treasury has developed proposals to exempt land transactions valued at Sh1 million or less from stamp duty and to introduce progressive rates for higher-value transactions. These measures will help reduce the cost of acquiring and transferring land, strengthen security of land ownership and make property ownership more accessible to ordinary Kenyans,” said the President.

Under the current tax framework, stamp duty is charged at 4 per cent in municipalities and urban centers and 2 per cent in rural areas. Under the proposed waiver, an urban buyer purchasing a plot valued at Sh1 million will save Sh40,000, while a rural buyer will save Sh20,000.

The President confirmed that the legislative proposals will be tabled in Parliament next week.

According to data from the State Department for Lands, stamp duty collections grew by 27 per cent from Sh11.8 billion in the 2023/24 financial year to Sh15 billion in 2024/25. Combined collections from capital gains tax and stamp duty reached Sh26.8 billion in the year ending June 2026, marking a 28 per cent increase.

By waiving a portion of these revenues, the government is surrendering growth momentum at a time when it faces mounting pressure to fund a Sh4.8 trillion national budget and narrow the fiscal deficit.

Because the Treasury has not released data on the proportion of land transactions falling under the Sh1 million threshold, the total cost of the tax break remains unknown.

“The progressive rates for higher-value transactions become the offsetting measure, though the government has not disclosed what those rates will be or where the thresholds sit,” said independent economist Ian Njoroge.

“If the higher rates are set too aggressively, they could dampen the top end of the property market. If set too gently, the revenue loss goes unreplaced,” Njoroge warned.

The tax relief arrives amid broader structural tax collection challenges. Treasury Principal Secretary Chris Kiptoo previously revealed that the government collects just Sh17 billion annually in rental income tax against an estimated potential of over Sh100 billion—capturing barely 17 per cent of expected revenue.

Despite reducing the rental income tax rate from 10 per cent to 7.5 per cent in 2023 to incentivize voluntary compliance, the shortfall persists due to widespread self-reporting non-compliance.

A Kenya Revenue Authority (KRA) audit revealed landlord underreporting as high as 75 per cent in key Nairobi residential neighborhoods, with over 60 per cent of landlords operating entirely outside the tax net.

Furthermore, the Electronic Rental Income Tax System launched in 2025 had registered only 1,412 landlords and 26,668 property units by April 2026—a fraction of its target to generate Sh80 billion annually.

While draft regulations published in May propose mandatory digital registration for landlords, enforcement will take time, leaving an immediate revenue gap in budget execution.

The land tax relief forms part of a broader economic relief package. President Ruto has also proposed exempting workers earning Sh32,333 or less per month from PAYE, removing the 25 per cent import duty on mobile phones, and expanding the national internship program to 50,000 young graduates.

The measures target cost-of-living pressures that have fueled public dissatisfaction among low-income earners and young voters.

“The most likely outcome is that the exemption passes, delivers a modest but real saving to thousands of small land buyers, and becomes a permanent feature of the tax code,” Mr. Njoroge said.

“The revenue hole it creates will be absorbed into the broader fiscal deficit, papered over by borrowing and by the hope that higher rates on expensive land and a stronger property market will eventually make up the difference.”

“Whether that hope is justified will become clear only after the bill is law and the first year of collections is tallied.”

While the stamp duty waiver provides President Ruto with a compelling public narrative and small-scale buyers with tangible savings, analysts warn that the underlying fiscal tightrope remains as precarious as ever.