State Minister for Investment and Privatisation, Evelyn Ainte has revealed that some investors who got bank loans via mortgage using government land in industrial parks have diverted the money into other things.
This revelation comes at a point when the banks through their umbrella association Uganda Bankers Association (UBA) are expressing fears that money they lent to investors in mortgage form in industrial parkland have not been paid and some of these investors have disappeared, thus increasing risk exposures of bad loans in banks.
Mortgage markets are a key element in the overall functioning of the financial system, not least in relation to the depth and liquidity of markets on the funding side of banks.
In an interview with Daily Monitor on June 20, Ms Ainte said some investors borrowed from banks using mortgages with the promise of developing the land they had been allocated in the industrial park but they did not develop the land.
“What the bankers are saying is very true. Some investors who got a mortgage from different banks have failed to put up any investment on the land and have disappeared. Some of them (investors) diverted the money to do other things instead of using the money for the purpose they had borrowed it for,” she said.
In June 2019, the Ministry of Lands Housing and Urban Development, acting on presidential directive on mortgaging government land to investors said Cabinet approved a directive that all land leased to investors must include a provision which states that the land cannot be mortgaged by the investor for any loan to a bank or any financial institution.
The Ministry of Lands further states that the Uganda Land Commission, Uganda Free Zones Authority and Uganda Investment Authority or any other Ministries, Agencies and Departments should not consent to any application for mortgaging land leased to any investor.
Ms Anite while mortgaging government in the industrial park, has been stopped. Following the President’s directives, the government is still working on a way forward regarding mortgages in the industrial parks.
“In the directives, the President asked us (Ministry of Finance, and the Ministry of Lands to make a cabinet paper. We are going to come up with the cabinet paper on this matter of mortgages in industrial parks,” she explained.
Mortgage finance is a loan given by commercial bank or mortgage bank to finance the purchase of real estate with specific payment schedule and interest rate.
Ms Anite said it is disappointing that the investors got government land on incentives and they also got the loans from banks to carry out investments but failed to do what was expected of them. This implies that there were corruption tendencies.
Ms Anite said it is disappointing that the investors got government land using incentives and loans from banks to carry out investments but failed to deliver what was expected of them.
This implies there were corruption tendencies.
“There are lists of investors who have disappeared without doing any development on the land they mortgaged as well as failing to pay back the bank loans. I wonder how they got an incentive from Uganda Investment Authority,” she said.
Ms Anite added: “When someone gets a mortgage and fails to pay the bank loans, the banks take over the land. But the banks can not take over government land. Those people received the land as an incentive to carry out investments,” she explains.
Ms Anite said it is disappointing that the investors got government land using incentives and loans from banks but failed to deliver what was expected of them. This implies that there were corruption tendencies.