New Vision (Kampala)
Ricks Kayizzi
1 July 2009
opinion
Kampala — UGANDA currently has a housing deficit of more than 1.7 million units and the figure is rising annually in tandem with a high population growth rate.
A public-private partnership where Government provides land and manpower to erect houses, while the private sector provides the finances, would have afforded the ideal way of dealing with this deficit, but has been lacking.
People have recognised they can use the money they spend monthly on rent to finance long-term mortgages after acquiring their own homes, and are running to banks to benefit from these facilities.
Quick in recognising opportunities, banks have come up with different packages through which they provide long term loans and mortgages to the beneficiaries.
One of such packages is Stanbic Bank's Building Construction Loans, launched last year, and have gained a lot of popularity amoung Ugandans in both the high and low income earning brackets.
A sizable number of beneficiaries are presented with plans by developers, which they submit to Stanbic and get finance in form of mortgage, while others procure financing to complete their [shell] houses.
"We have registered a lot of progress, the fact that this is a particularly new product in Uganda not withstanding. Many people have appreciated our terms and the process is moving," said Sydney Mpipi, Stanbic's Chief Operations Officer.
He, however, pinpointed the slow pace at which developers work on clients plans for presentation to the bank's credit committee for approval, as hindering the progress of the package.
Mpipi said that although they had initially targeted to fund property of between $100,000 and $140,000, they may scale it down in the future to enable as many Ugandans as possible benefit from it.
He said that after approving the loan application, they do not pay money straight into the beneficiary's account.
"We require them to find a developer of repute whom we pay in phases, depending on the progress of the construction work. The reason for this is that we do not want this money to go to any other purpose than the work for which it was intended," he said.
Damalie Kairumba, the bank's Home Loans Manager, said that the minimum amount that is being offered in this package is sh30.5m while the maximum is limitless and dependent on the client's ability to repay the loan.
Tom Newton-King, the head of products and segments said that supply of housing units by Ugandan real estate developers has not reached a stage where it would give variety to home purchasers, a situation they are trying to avert.
Vincent Agaba, the president of the Association of Real Estate Agents - Uganda, said that loans that are bent on enabling people obtain homes or complete erection of physical structures have proved to be popular among their clients.
"Because of their long-term repayment schedules, people of limited earning capacity have been able to benefit from facilities that used to be a preserved of the well to do. We have managed to link several of our clients to banking institutions that offer such facilities," he said in a recent interview.
He single out building construction loans as having flexible repayment terms and affords liberty to the client to design their dream home with a contractor and monitor its erection.
Peter Mugimba, a partner in Mugimba and Bandebire Advocates, who deal in real estate purchase and sale, mortgage finance and housing consultancy for their clients, said that home loans deductions may not be as financially hurting as personal commitments towards construction of a house.
"This is a form of forced savings, since it's not guaranteed that all of us have the capacity to pool resources and build houses privately. Such facilities are a godsend to thousands of Ugandans who lack proper housing facilities," he said.
Patrick Kaborero, Housing Finance Bank's executive director in charge of Development Finance, said that the need for housing loans has grown as a result of bank's outreach to explain their intentions to the general public that they are not all out to snatch their property but help them acquire wealth.
"The relationship between banking institutions and members of public has improved because of the open channel of communication. More people are now more inclined to escape renting and acquire a family home through a long-term credit facility," he said.
He said a sizable chunk of their loan facilities go towards financing residential housing in terms of mortgage finance and home construction loans.
Anatoli Kamugisha, the managing director of Akright Projects, a real estate dealer, said that since their clients are in possession of land titles to their property, helping them process housing construction loans from banking institutions has been simplified.
"Since the title will be in the name of the beneficiary, it is freely transferable for value, subject to the loan facility," he said.
Kamugisha said that they have since hatched partnerships with dfcu, Stanbic and Centenary Bank, to offer mortgage, home purchase and housing construction and completion loans to people who purchase houses in their ten estates located in and around Kampala.
Although he couldn't specify the number of clients who have benefited from such facilities, he said that the easy processing of such facilities have made them particularly appealing across the housing finance spectrum.
Other banking institutions that have come up with housing loan and mortgage packages include dfcu, Barclays, among others.
If well executed, this kind of housing finance will go along way towards curtailing the housing drought that has turned into a bellowing huddle to millions of Ugandan families.
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