On 12th March, 2019, the President of the Republic of Kenya signed the Urban Areas and Cities (Amendment) Bill 2017 (“the Amendment Act”) into law. This new law seeks to amend the Urban Areas and Cities Act, 2011 (“the Act”) by providing for a new criteria for classifying an area as a city, municipality, town or market centre.
Under the Amendment Act, the population required for an area to be classified as a city has been reduced from 500,000 to 250,000 residents.
In addition, the resident population required to classify an area as a municipality has been reduced to at least 50,000 residents from at least between 70,000 to 249,000 residents.
In order to be classified as a municipality, the area must also have an integrated urban area development plan; the capacity to effectively and efficiently deliver its services to its residents; and a demonstrable good system and records of prudent management.
Of note is that every headquarters of a county government shall automatically be classified as a municipality, whether or not it meets the criteria set above.
For an area to be classified as a market centre, it must have a resident population of at least 2,000 residents and an integrated urban area development plan which is in line with the Act. The county government is in charge of managing such areas.
Stamp Duty Implications:
The stamp duty payable in respect of transfers of immovable property is pegged on whether the property is located within a municipality or a rural area.
The current rate of stamp duty payable in respect of transfers of immovable property located within municipalities is 4% of the value of property while the stamp duty payable for transfers of immovable properties located outside municipalities is 2% of the value of property.
The amendments will therefore significantly affect the amount of stamp duty payable in respect of transfers of immovable properties since areas that were formerly classified as rural may now be classified as municipalities. An example is Kathwana market centre which is the official headquarters of Tharaka Nithi County.
The Amendment Act can be found here