Real estate trend setters of 2014

There are many determinants of the trends in the real estate world and as the year comes to an end, we bring you the issues that shook the real estate sector.

Property mogul Sudhir Ruparelia summarises 2014 as a generally tough year for real estate explaining that one needed to have invested heavily in the business in order to speak of any meaningful or sizable profits from the business.

“Real estate can be a good business or a very dangerous one. I can only advise people to go into real estate if they have surplus money, where they can put money from their existing cash flow and forget about it. To borrow money and invest into real estate is very dangerous unless you have a lot of cash coming in and you can manage to pay,” he explains.

The mogul says he owns some 350 real estate properties around the country. He explains that over time, he has invested in real estate to a point where they can create their own cash flow. He, however, adds that 2014 has been a hard year for Uganda economically, which has essentially affected the real estate industry too.

INFLATION
“The fiscal policy used by the Central Bank to control inflation had its effect on the rest of the economy, including real estate, because of high interest rates and it is a price we are paying for. I reckon the economy will start looking better in August 2016,” Sudhir Ruparelia projects, highlighting one of the challenges real estate has suffered.

HOUSE PLAN
In his assessment of 2014 and real estate in general, Denis Jjuuko, who runs VIP Ventures, which deals in real estate business, explains that part of the reason real estate business has suffered is because locals build their houses very expensively.

“It is like we are building bank vaults (dorms); brick walls everywhere instead of cheaper dividers that are so common elsewhere. Our roofing styles are the type that flow from one side to the other all of which make houses very expensive.

We need to rethink our building model to ensure that houses are cheap and affordable,” he explains adding that it is cheaper to buy a house in the cool northern suburbs of Johannesburg than in Kisaasi or Buwaate which are really unplanned villages.

THE NEIGHBOURHOOD
Anatoli Kamugisha, the managing director of Akright Projects Limited, which deals in, among others, real estate business, says 2014 has seen a continuance of a trend of people acquiring properties.

Some of the areas he points to for attracting a high price include high-end neighbourhoods such as Kololo, Nakasero, Bugolobi, Mbuya, Ntinda Lubowa, Nalya as well as his estate in Kakungulu, off Entebbe Road.

“Such places have been highly priced for a natural reason of being well-planned excellent functionality and organised living environment,” he observes, adding that as a matter of fact, it is easier and cheaper for someone to build in such areas given the good road network that allows easier access to sites as well as other social structures like availability of electricity, labour and related factors to the construction processes. Jjuuko says there is no single specific area that people prefer. It depends on the price and people’s preferences.

THE COST OF LAND
Anatoli Kamugisha, the Managing Director of Akright Projects Limited says the price of land around the country has been determined by factors such as location, for example land in high end places will attract a higher price than those in middle end or low end locations. He also points at the proximity to the road or town or Kampala- the capital city- as other important factors that will dictate how high or low land will be priced.

“Then for what makes land cheaper to build in planned areas is that infrastructure and services are homogeneously distributed to all plots for construction,” Kamugisha adds. Like that, land will have such a big disparity, all owing to the mentioned factors. The real estate dealer says land this year has been priced between Shs15m to Shs1bn.

He adds, “This year, I have sold plots of land in Nansana for Shs15m and for the same size of plot in Kololo, I have earned Shs500m.” He says buyers’ choices are mostly informed by factors like landscape, vegetation and the view the plot offers or allows them.

Denis Jjuuko who runs VIP Ventures says other reasons that have determined prices of land in 2014 and previous years is how much developed an area is on top of the general infrastructure around the particular area.

“The land’s proximity to schools, hospitals, shopping centres, etc, are other factors buyers were considering before making a decision to buy a piece of land,” he adds. This means that a buyer will be assured of such services at close range which will mean they will not be driving cars to far away places to get them. On the whole, 2014 has had its highs and lows and as Sudhir observes, it needed one to have a strong footing in the business and not necessarily look at it for a quick profit in order to make real business sense out of it.

LAND VALUE
Denis Jjuuko who runs VIP Ventures argues that land value has not been realistic because the value was based not on real economic indicators rather on corruption and sustainable demand from South Sudanese among other foreigner buyers.
“A lot of people who bought properties from the estates four to five years down the road are still looking for tenants. Also, the mortgage rates are so high in Uganda all of which make houses and land value so high. Then there is the issue of claimants or land squatters. They willingly sell you land and the next day, they are calling State House while making all sorts of allegations, and one day you see a minister turning up saying those titles are invalid. All these things make real estate an expensive business. Nevertheless it is still a good investment if you invest rightly,” he elaborates.

PERFORMANCE OF THE ECONOMY
“What we have seen this year and I think for a couple of years now is that there is less superlative buying simply because the economy is not performing that well. In the past, people would be excited to buy in areas that are nearer say to Entebbe Express Road and a lot of people who bought land for speculative purposes still have the land. There are less buyers these days.

There are more sellers. It has really been a buyer’s market,” Denis Jjuuko who runs VIP Ventures observes. Nevertheless, Jjuuko adds that there are some interests in land for farming that is nearer Kampala. However he notes that there isn’t much tracts of land that are free from wrangles.