High rates on mortgages put off potential home owners
A housing estate in a Kampala suburb. Photo by Ismail Kezaala.
What you need to know:
Ugandans have in the last three years seen a drop in the value of the shilling, which has driven up mortgage rates.
With interest rates hovering at more than 20 per cent, hope of owning a home through a mortgage arrangement has become slim, according to industry players.
Analysts say the matter is further compounded by the country’s archaic land use and management policies where land is haphazardly used with no proper development plans.
“In any case, the real estate (mortgage) industry has in the last few years slowed declining is sales and growth,” says Mr Anatoli Kamugisha, the Akright chief executive officer.
High interest rates on mortgages
He said: “It’s hard to acquire land for development. It is quite expensive and this cannot be helped by the high interest rates on mortgages.”
This, he says, is further worsened by low purchasing power and a poor savings culture among Ugandans.
“If you get off the 40 per cent from one’s salary to service a mortgage, you discover that that person will not be able to survive with the remaining balance. Therefore, many people will prefer to buy a piece of land and build at their pace rather than taking a mortgage,” Mr Kamugisha said.
Mr Kwame Ejalu, an industry analysts, says affordable mortgages can only be available if Ugandans make a change in attitude.
He says: “In the Western world, houses are so cheap because there are so many alternatives. But in Uganda, houses are mostly built using heavy material like walled fences which sometimes is really expensive. Real estate dealers must start thinking of alternatives.”
Low mortgage-tailored product
Mr Ejalu, who has also since ventured into estate development, says the industry does not have many financiers who understand how the business works, which, as he says explains why there are few banks that fund real estate ventures or few products tailored for the market.
“One time a financier told me that my supplies must first reach Mombasa before any money is disbursed yet I needed money to help me clear my goods at Mombasa.”
However, while addressing real estate developers at a send off dinner for developers to Turkey and Dubai, Mr Martin Owiny, the KCB executive director, dismissed the pessimism saying mortgage rates have been moving downwards over the years and are expected decrease further.
He says: “Compared to two years ago, the situation has changed. Rates have been dropping. This is good news for the mortgage business.”
