Walter Wafula
3 November 2009
While the developers are making an attempt to put up new houses, their effort is like a drop in the ocean because not many Ugandans earn that much to purchase these houses. Many of them are opting for constructing their own homes as they believe it is cheaper at the end of the day. However, mortgages are choking up many home owners.
For all the doom and gloom about the housing market, it still generally pays to own a home.
That might be a tough case to make right now to the over 5,000 Ugandan homeowners who owe more on their mortgage than their house is worth.
Janat and Twaha Ssenyonga's family was always on the move. In fact, they moved eight times in their 10 years of renting. They always had complaints about the houses they were staying in like bad landlords, a leaking roof, bad road, dust, mosquitoes and of course their growing family capacity.
Janet was an accountant and Fred was a business man whose nature of job could not easily allow him access a loan.
From one of the banks around Kampala, the Ssenyonga's were able to access a mortgage loan and home, which provides shelter and a better environment for their family.
"My wife was expecting our sixth child, we had school fees to pay and of course other costs there in," Mr Ssenyonga said.
The mode of payment was from Janat's salary account. Every month, the bank was deducting the reducing balance loan from her salary with a 21 per cent interest. However, the bank officials had not disclosed to the couple about some costs like the insurance cost and loan premium costs.
Six months after dedicated loan payment, the bank officials approached the couple luring them into getting a top up loan, which they took out not knowing they would pay the initial loan costs again.
After another three months, Janat lost her job and its five months now and she has not got another job yet. Though the house is now complete, the couple is battling it out with the bank to see that their loan is recovered.
Home ownership
A house is an asset that most people, if not all, aspire to own.
Depending on the above experience, owning a house or a flat is no mean feat. Most Ugandans usually acquire bank loans or have to work tirelessly hard or save for decades to own houses.
Because there is no clear national plan for people to own houses, Uganda is short of up-to 1.6 million housing units needed to meet the rising demand for accommodation in the country.
"Kampala alone needs more than 100,000 descent houses for its inhabitants," the State Minister for Housing, Mr Michael Werikhe, recently told Business Power.
The Managing Director of Akright Projects Limited, Mr Anatoli Kamugisha, said to increase the number of houses, the government needs to promote decent accommodation by making property development cheap.
"The government has to come in and show that it is a serious partner because houses are essential but they are very expensive to provide," Mr Kamugisha said.
The property developer behind the Akright Kakungulu Satellite City in Wakiso District, says the government should demonstrate its commitment to increase the number of houses needed by giving incentives like tax holidays and guarantees to commercial banks that are financing the construction of private homes.
Most houses built by real estate companies range between Shs80 million ($42,000) and Shs564 million ($300,000).
However, individuals spend between Shs4 million and Shs800 million to build their homes, depending on their income levels and the type of houses they would like to spend the rest of their lives in.
"The banking industry should be encouraged to invest in homes and not only in commercial property. Property ownership should run under the mortgage arrangement because it enables everyone to afford a house," Mr Kamugisha explained relating to the practice in both advanced and developing economies that has boosted house ownership.
To promote home ownership, Finance Minister Syda Bbumba in the 2009/10 budget abolished the 5 per cent rate applied on sale of houses and exempted developers from paying Value Added Tax (VAT).
Call for good infrastructure
However, Ms Nakku Senkeeto, the general manager Kensington Real Estate, said the impact of the budget incentives has not been felt yet instead she made a case for streamlining the housing sector by making adjustments in land registration and improving or building new roads to various parts of the country.
"Infrastructure plays a key role in determining where people want to live. If someone has to go through potholes and heavy traffic to get home then they would rather stay near town," she said interview last week.
Referring to the recently opened 21 kilometre Kampala city Northern By-pass, Ms Senkeeto said the construction of the road has made the location more accessible.
"Before the Northern By-pass, it was difficult to get to Kisaasi. It has now become on eof Kampala's prime locations," she said.
Kensington is building 149 luxury houses in Kyanja near Kisaasi and the first 50 houses are expected to be ready for tenancy by the end of this month.
She also called for 'better organisation' at the land registry, where land titles are awarded saying the process of acquiring a land title should be streamlined.
"Don't give us five months to get a land title. Have dedicated people that do particular work in the land's registry," Ms Senkeeto said.
Even the legal requirements needed, Ms Senkeeto said, should be streamlined so that it is easy for people to get their land titles and move on to build houses.
"If the government can have a big hand in the way real estate's operate, then as real estate developers, agents and companies, it would make our work more efficient, and effective to deliver or supply the products that meet demand," she said.
In addition to the government partnering with real estate business people to increase house ownership, Mr Wilbrod Owor, the head of consumer banking at DFCU Bank, suggested that commercial banks, landowners, property developers and agents to boot the supply side of the market so that houses are made affordable for the working and middle-class.
But for the collaboration to work out, especially between banks and developers, Mr Owor told Business Power that the developers have to demonstrate that they have the capacity to absorb the credit and payback.
"They have to show that they can be entrusted with money and they deliver good quality housing on time so that even the buyer is comfortable with what he gets," he explained. "If the supply-chain is got right, I think the buyers will be in position to take the houses and the industry will grow the housing market."
Moving forward, Akright Projects, which has put up 1,000 houses in the last decade, plans to construct 4,000 new houses in the next five years in Kampala and Wakiso Districts. The indigenous company has signed a contract with a Norwegian property firm called Pride Architects, to build 100 low-cost houses every month and a total of 1,200 units annually, according to Mr Kamugisha.
The houses will be inbuilt with two-three bedrooms, living room and kitchen for about Shs47 million ($25,000) or less, which will be paid over a period of 20 years.
Pride Architects and Akright have already partnered with local banks to help prospective house buyers acquire the houses. The first houses will be up for grabs by December 1, at Akright's Namanve Housing Estate while others are planned for the Kakungulu site.
The partnership between the two firms will be a boost to accommodation needed by the rapid growing urban population, which is partly to blame for the shortage of decent houses in towns.
According to Mr Werikhe, the rapid urbanisation currently stands at 5.1 per cent per annum while the 2007 State of Uganda Population Report says Uganda has a housing shortage of 211,000 units in urban areas and 1.2 million in rural areas.
Other services
Besides, Akright and Kensington homes, another 2,368 homes plus social facilities, will be added to the national stock by the National Housing and Construction Company at Namungoona on the outskirts of Kampala city. Nationwide Properties, a real estate venture between Property Services and Mukwano Industries is also constructing another 1,300 up market residential houses estimated to cost about Shs282 billion ($150 million), at Butabika Hill, in Kampala.
So far, to make the houses in the new estates affordable, the developers have partnered with banks like Stanbic, Barclays, Housing Finance, Standard Chartered, and Development Finance Company of Uganda (Dfcu).
According to Mr Owor, the houses are financed for individuals at interest rates ranging between 16 and 17 over a period of 5 to 20 years.
Under the financing arrangements, for instance the one between Kensington and Stanbic Bank, the house buyer is required to pay 20 per cent of the total cost of the house and the bank finances 80 per cent over a given period.
"We have brought on board many owners through this arrangement and there is growing demand," said the banker adding that the number of applicants for house loans has grown by 43 per cent from 2008. The amount of money the bank lends for constructing houses and buying land has also gone up by about a half.
Loans have also been extended to property developers, like Jomayi and Canaan Sites, to purchase land for new estates and build unfinished models of the houses for buyers While the developers are making an attempt to put up new houses, their effort is like a drop in an ocean.
To complete it, the government as stressed, needs to invest in infrastructure, in addition to developing a feasible national housing policy that will ensure that Ugandans live in decent houses.
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