Kampala — PROXIMITY to the electricity grid greatly influences the rate of success of many real estate investors.

People who buy properties with an intention of building homes, shun estates that lack electricity supply lines. Reason? Extending a power supply line, even for as short a distance as one kilometre, costs millions of shillings.

The Government had promised to connect private real estates to water, road network and electricity, but this has not yet happened, which has made investors who had purchased land in remote areas incur high costs.

Although hydro-electric power is the cheapest source of energy in the average Ugandan home, other renewable energy resources are gaining prominence.

However, the combined contribution of renewable sources of energy to the total energy consumed in the country is estimated at a mere 2%.

These energy sources include wind, biogas, solar, geo-thermal, liquid fuels and peat.

One particular source that has caught the eye of real estate developers is solar power, which has been pin-pointed as reliable, environmentally-friendly and cost-effective.

Solar energy has been dubbed as 'clean energy' in both developing and developed countries. While there are no additional costs such as maintenance after installation, there is an option of upgrading it by purchasing more panels to operate more gadgets in the house.

Solar Energy for Africa, one of the firms that deals in solar panels, sells its smallest home solar electric system at $195 (about sh429,000), according to officials.

Once harnessed, solar energy can help real estate developers significantly cut down on operational costs and increase on their profit margin.

This is because it is bought by individual residents, does not require a grid network or monthly service and consumption fees, and can take up to 20 years without developing major defects.

PostBank, under their Rural Electrification Initiative, has taken advantage of the increasing popularity of solar energy usage to unveil packages for home owners and real estate developers.

Akright Projects was the first real estate firm to benefit from this arrangement.

The deal, through which PostBank provided solar panels to about 300 Akright Kakungulu Satellite city residents, was aimed at lowering their energy costs.

"On top of helping people save on what they spend on energy, they will overcome loadshedding by having a reliable source of power," Anatoli Kamugisha, the Akright Projects managing director, said.

Samuel Okello, PostBank's relationship officer, said their solar loans, which have a 30% government subsidy, were re-payable in 36 months.

Solar panels cost between sh60,000 and sh7m.

"We are targeting everybody, from real estate developers to individuals home-owners in both urban and rural areas. With this subsidy, no one can give an excuse for not accessing power," he said.

He said that if the solar panel has a price tag of sh1m, government pays sh300,000 of that, the individual benefactor pays sh200,000 cash, while the remaining sh500,000 is the amount given as a loan.

Although the supply of Solar power can fluctuate depending on the amount of sunshine, it's highly reliable especially in countries like Uganda with a tropical weather pattern.

Their cost, however, could prove a huge deterrent, and are still expensive for most consumers in Uganda.

Accessing a government subsidy to enable the majority poor acquire solar panels and light up their homes is a godsend gesture to millions of Ugandans especially in the rural areas where the electricity grid doesn't reach.

F.C. Oweyegha-Afunaduula, a Lecturer at Makerere University and Secretary of the National Association of Professional Environmentalists (NAPE), however pinpoints that solar power is not as expensive as exaggerated by technocrats.

"They conduct this negative campaign in order to make hydro-power appear cheaper to legitimize the choice of large dams' based electricity in developing countries, especially those endowed with large river water ecosystems," he said recently.

He referred to Solar as the real "poor man's energy source" which can succeed very well in developing countries like Uganda.

According to reports from the ministry of Energy, hydropower provides about 95 % of the country's utility power supply.

"This resource contributes to less than 11% of Uganda's total energy consumption. Uganda's hydrological resources are estimated to have a potential power production of over 2500 MW," it said.

The high power tariffs, which have been blamed for the slow electrification process, has prompted government to move swiftly to address it.

"We want to bring down electricity prices by 50% in a bid to lower the cost of production and make power affordable for the masses," said Hillary Onek, the Energy minister, adding, "We are re-examining the current electricity tariffs and our target is to reduce the prices by half," he said recently.

Uganda has the highest power tariffs in the East African region. Domestic consumers pay sh62 per unit for the first 15 units after which it goes up to sh426 per unit.

Edward Twine, the spokesperson of Umeme, the power distributors refuted claims that they have systematically raised the power tariffs over the years, urging that it's the Electricity Regulatory Authority that is charged with making such a move.

Real estate developers have also complained about high electricity installation costs by Umeme, adding that Government should make good its promise to bring power into the estates.

"This would help offset our costs in coming up with functional satellite cities, which will in the long run help in decongesting Kampala," said Kamugisha, also chairman of the Uganda Property Developers Association.

The fact, however, still remains that availability of energy is an important determinant factor in Uganda's economic development, leave alone the real estate sector.