Construction industry wants rates reduced to build affordable houses
Posted Monday, August 25 2014 at 01:00
Still expensive. Most lowly priced houses range between Shs80 million and Shs300 million.
Construction Industry players are engaging the Central Bank over the possibility of offering reduced interest rates for developers investing in residential properties, a real estate official has said.
Speaking at a breakfast meeting organised by Stanbic Bank home loan department on Friday in Kampala, the president Association of Real Estate Agents (AREA), Mr Andrew Mukiibi, said: “Bank of Uganda is willing to give industry players who are members of AREA a tailor-made interest rate as it is the case with agricultural loans.”
He continued: “We are in negotiation with the central bank over that because if we don’t address this issue (interest rate matter) then it will be impossible for us to provide the low-end housing units because we cannot afford it as it will be very expensive for us and even the end users.”
Though he did not reveal the rate that could be suitable for the industry players to provide the low-end housing units, it is understood that the association leaders are pushing for a 7 per cent flat rate.
Mr Mukiibi also revealed that President Museveni has assigned the industry association the mandate to develop low cost housing that should take care of the housing deficits estimated at 1.6 million. This project will kick off early next year with 1000 housing units after sealing a deal with a private equity investor.
According to him, currently the market rate developers who borrow in dollars are parting with 11 percent interest while the ones doing so in shillings have to endure with 23 percent interest rate. “Coupled with the high prices for land, these percentages are very high. And this explains why the property prices are high and therefore only afforded by high-end market,” he said.
Stanbic Bank head of marketing, Ms Jackie Namara Rukare, said in an interview: “We base our interest rates on the Central Bank Rate (CBR) that Bank of Uganda sets. So the more friendly the CBR is to us, the lower the interest rate could get. So this is a matter that will take a concerted effort.”
Tapping finances from equity firms to develop cheap houses
At the moment most lowly priced houses go for between Shs80million and Shs300million, an amount of money that is exclusive for a narrow high-end market.
“It is still a struggle to provide a low cost housing because we are even finding it hard to come up with Shs60million housing unit,” the Director of Dasheen Real Estate and Construction said at the breakfast meeting.
Mr Peter Sewagudde, an industry expert, said developers should tap finances from private equity firms because they are willing to invest in such ventures with minimum requirements. He said: “The industry must do more in creating awareness about low cost housing as well because there is demand for it only that many do not know it can be made available.”
The regional director of RE/MAX, Mr Arthur Mukembo, also an industry analyst, said: “Provision of low cost housing is a must or else the largest segment of the population will continue to grapple with shelter issues.”
The country director of Aqeeq Ltd, said his company is constructing Shs45million one bedroom housing unit, probably the cheapest so far, with the view to have all Ugandans afford a shelter.
Ministry of Housing statistics indicate that the country has a deficit of 1.6million housing units which is annually growing at the rate of 160000.