There are many questions arising from the coronavirus pandemic. Is it preventable? How fast is it spreading? How dangerous is it? Will a treatment or even a cure be found in time? But what most real estate stakeholders want to know is how long it will last and what impact it will leave on the sector.
So far this has proven to be a hard year for the economy. Economists are predicting a recession and a lot of small businesses are facing the prospect of low to no revenue. These are the people that participate in the sector because most purchases in Uganda tend to be self-financed.
Glimmer of hope
Robert Okwir sits in his property management office, now eerily empty of the usual traffic of brokers, clients and agents. His phone which usually rings nonstop is silent too. However, he refuses to despair. He says his faith was rewarded when he managed to close a sale on a three bedroom bungalow in Buwatte early last week.
“There are still people willing to buy. People will always need somewhere to live and others will need to sell. In fact, some investors are taking advantage of the situation and picking up properties at bargain prices. But that is at a very small rate,” Okwir remarks. He however, concedes that the industry has been hit hard by the covid-19 pandemic and might take a while to recover.
Okwir is one of the many real estate industry stakeholders that are beginning to feel the pinch resulting from the coronavirus pandemic. For the time being, the industry experts are ambivalent; for the time being, they continue to hope for a positive break.
“The situation keeps evolving every day; people were hopeful until the President banned public transport. This has brought business to a quick stop and people are still stunned wondering what is coming next. They are yet to decide whether to push on or wait until things get better,” Okwir notes.
He admits that he has not gotten many new calls from sellers or prospective tenants. “Other brokers and I understand the situation so we are not pushing people to make commitments. As a matter of fact I have asked my employees to stay home and work virtually,” he adds.
Up until last week, Okwir and his staff were still showing houses. I encouraged everyone to wipe down their cars with disinfectant, wear masks and gloves.
At the houses they wiped down the door handles and the counters and stayed the required distance from each other. The prospective clients were given gloves during the viewing. Although it was inconveniencing no one objected,” he says.
Cissy Namaganda another property manager says her business has been hit hard since she mostly manages commercial properties. “About 80 per cent of the properties I manage have shut down because all the businesses are not making money.
Collecting rent is harder than usual and most of them will not be able to pay rent for the next few months depending on how long the crisis lasts. Yet we as property managers still have bills to pay, the service providers such as water, electricity and cleaners all expect to be paid. It is a very hard time for us all,” she reveals.
Social media can be so meaningful right now. With the social distancing, it mean people are spending a lot of time on their smart phones looking for information and inspiration online. Namaganda encourages agents and brokers to make use of this platform.
“Although we have been cut off physically, we can still use technology to show buyers what we have. People already had social media platforms and now is the time to utilize them to the maximum. They can invest in coming up with tools that are able to market their properties properly. They can also rely on the trusted old method of putting up physical signage on properties for sale or rent as I do,” Namaganda suggests.
Shirley Kongai the president of the Uganda real estate agents says the crisis has affected everyone and every businesses and real estate has not been spared.
“Everyone is being encouraged to go into self-isolation so we have also asked out members to stay home and embrace the digital platforms. Some heeded our advice and started putting more effort in their digital platforms. This effort for now might not yield any actual business because people are not spending since they are still speculating about what is going to happen in the future.
So business is very low when it comes to sale of properties,” she notes. Kongai says the most affected areas are rentals, loan financing, mortgages people are not earning so they are not able to meet their obligations.
“Not all businesses have been affected though, for instance pharmacies and drug shops are making money right now.
Those affected are those involved in businesses that have since been categorized as non-essential such as entertainment and hospitality areas. The big question has been whether landlords should suspend rent, but, they are asking what will happen to them when they have to meet their obligations such as bank loans, taxes, interest rates. Will they also be exempted, will the suspension be all around?” Kongai reveals.
She suggests that if they give up on collecting rent, banks should also give landlords a grace period. “We are asking the government to come in and waive taxes and direct banks to waive payment of loans, mortgages and the interest rates for those months. If they are catered for, then landlords are ready to suspend their rent or negotiate,” she says.
Kongai reveals residential are the most hit properties. “People are at home and are not able to pay their rent. We are asking people to help and support each other by letting people off without payments here and there until we get out of this crisis,” she appeals.
Some office buildings that were occupied by businesses servicing the tourism industry will experience a more direct impact.
The tenants in that situation may either absorb the cost, request for credit facilities or simply hand over the keys to the landlord. This real estate asset class may not have the immediate impact but many businesses have adopted a work-from-home policy in order to ensure continuity of the operations due to the COVID-19 outbreak.
This process of telecommuting may encourage businesses to try new cultures and processes which could be adopted in the aftermath of the COVID-19 pandemic.
The impact on the commercial property sector in the country could be everlasting as businesses will re-think about their office space requirements with a remotely working policy.
If their staff can telecommute easily and a result-only-work-environment is implemented, this could be a game changer. Co-working spaces or shared offices will also see lower traffic and a fall in demand in these current circumstances.
Property owners may negotiate new rates or reduce space requirements at the renewal. In the wake of a possible recession as a knock-on effect of the virus, the valuations of the office properties could be impacted as future cash inflows from the rentals of the office spaces could thus be challenged.
Consequently, it is unlikely for the social distancing measures established by some supermarkets to be successful. Avoiding crowded areas can be a helpful tool in mitigating the spread of the virus and if the population follows this advice, the immediate impact on the real estate retail asset class could be significant as people would avoid shopping centres and malls.
While people still need food, clothes and other essentials, they may turn to online shopping which has started to gain momentum.