After four years of a mind-numbing experience paying rent, Alfred Kakuru, an employee of one of the corporate companies in town thought it was high time he owned a house. He sought a mortgage loan from one of the local banks.
"I really hoped I had survived the hassle of rent with landlords," he says.
By the time he acquired the loan, it was valued at the interest rate of 15 per cent. Kakuru thought his salary of Shs 750,000 a month would help him finance the mortgage and realise his dream for a home. However, this was not to be. The demands become too much and the interest rate was revised upwards at the peak of inflation in 2011, when the number touched 30%.
"The bank kept on informing me of the changes in the interest and they had become more unaffordable," he says
As a result, Kakuru failed to meet his loan obligations and his house was sold by auctioning.
"I have a feeling the bank was unfair to me," he says remorsefully.
Yet Kakuru is not alone. A flip through the local papers, one is struck by the rate at which people are losing property, in what is assumed as takeovers by banks. Unoccupied properties and foreclosures are what characterised the real estate industry in the last one year.
We have no actual figures of the foreclosures that happened in 2011 and 2012, but industry players say they were at the peak. Experts predict 2013 will not be any better. Nicholas Arinaitwe, the president of real estate agents in Uganda, predicts that the property market will continue to decline this year.
"The market excitement enjoyed in the last decade may not return soon," argues Arinaitwe.
Samuel Sebowa Kigulire, Director Bogere Enterprises and Property Agents company, says at this point everyone is stuck.
"People are stuck, banks are stuck; no one knows what to do.
"In fact, the worst is yet to come. The situation is not going to be any better," he says.
So, what went wrong? According to Anatoli Kamugisha, the MD for Akright Uganda, one of the leading companies in the sector, three things explain this quandary: Bank of Uganda's policies, inflation and URA's tax on whoever buys a property above Shs 50m.
"The central bank rushed to introduce her tight monetary policies and they cost us all," says Kamugisha.
To Nicholas Okwir, Housing Finance bank's Managing Director, the mortgage loans have remained expensive.
"The price of money is expensive and that's why there are so many foreclosures. People have failed to finance their [mortgage] loans."
He adds: "Foreclosure is not always the bank's best option, but what can you do if it's the only choice [to recover your money]?"
Indeed, when BoU tightened her monetary stance to curb inflation, it tempted banks to raise lending rates to an average of 30 per cent. Here, it became a double-edged sword as most people struggled to service loans as well as cope with the high cost of living. But Bank of Uganda's director for research, Adam Mugume, is optimistic the industry will recover.
"It takes some time for the money to revolve within the economy. Now that BoU is reducing the CBR, private sector credit (PSC) will pick up and the [property] market will pick as well," Mugume told the press recently.
The cheapest house doesn't go for less than Shs 50m. This is far from the reach of people like Kakuru and many other Ugandans. For rent, the apartments in posh suburbs of the city like Muyenga, Kololo, go for between $500 (Shs 1.3m) and $800 (Shs 2m), a month. Someone who earns around a million a month can't afford that.
To Kamugisha, there can never be cheap houses if the development is still entirely in hands of the private investors. "To be sincere, in Uganda, affordable houses aren't there. You will never find a private developer targeting low cost," he says.
"But if the government partners with us [developers], they do infrastructure here and there, and we do other things, the cost of houses can come down.
"There are a lot of risks in the construction sector and to absorb the risk, you must have a high profit margin. No one is going to come from anywhere to build low-cost houses," Kamugisha told The Observer.