It will be the biggest project in the Mid North town since the construction of Ngawha prison more than 10 years ago.
It comes as BNZ builds the first new commercial premises on Broadway in many years, and as Top Energy plans an expanded geothermal power plant and possible industrial park at Ngawha.
Mr Luders said the rebuild would lift the entire Kaikohe community.
"The effect will be massive. It's not just about this school, it's about this whole area, and for Ngapuhi as a whole. This is a significant investment in the leaders of tomorrow and it's a real show of faith from the Government.
"For our kids, it's going to make a huge difference to have a modern learning environment, and a warm, modern, safe, dry building. It's very hard to come into these current buildings and feel any pride or mana, or think, 'boy, I'm going to be a success one day'."
Mr Luders said frustration in Kaikohe about how long the project had taken was due mainly to poor communication. The start date had shifted so many times - the last of many start dates was February this year - that people had lost faith.
"It's like designing a big ship, it takes a lot of time. We're just happy to have the announcement and to get going," he said.
Ms Kaye said construction would start early next year with the new buildings due to open in February-March 2017.
The project included a multi-purpose gym and hall, library and technology areas, space for the roll to grow to 450, and new changing rooms for the community pool. About $1.5 million in urgent health and safety repairs would be carried out on the existing buildings.
Only the administration block, which was recently renovated, and one other building will be retained. The rest will be bulldozed once the new complex opens.
Ms Kaye told the students the rebuild would come too late for some, but would bring "enormous pride" to Kaikohe.
Northland College was one of 30 old, leaky schools around the country the Government was fixing at a cost of $300 million.
She conceded the rebuild had been "a long time coming". Planning had been under way for the past few years but the process had not been well communicated.
Student William Hohepa, 17, said new buildings would lift pride and remove the stigma attached to Northland College.
"It's good to see the Government cares about us. The school fully needs it."
With the current buildings in such a poor state, students saw no reason to respect them. That would change when the new college was built.
William said the rebuild was being talked about when he started at the college four years ago. The delays made the kids feel like they didn't matter, he said.
Northland College hit the headlines in June when ERO inspectors were shocked to find that repairs they had deemed urgent three years earlier had still not been carried out.
Police had asked to use the college for training because of its resemblance to a "ghetto environment".
