What lies ahead for the real estate sector

For close to two decades, there has been talk of an increasingly vibrant and growing real estate industry in Uganda. This has been clearly evident despite the unpredictability of the Ugandan economy.
Time and again, different real estate players have been coming on board or in some cases, individuals getting themselves involved in buying and selling of property in any part of the country.

In 2018, the sector, according to Arthur Mukembo, regional director, RE/MAX-Uganda, a real estate agency and consultancy firm, acknowledged that there was a fair performance saying that: “Business and consumer confidence considerably improved, in line with improved performance of the economy.”
Predictions from different players in the industry indicate that the industry will mostly likely face new developments that will affect its performance both positively and negatively.

Residentials
The sell and buying residentials is with no doubt one of the most thriving section of the industry. This could be so because of the ever increasing demand of for residential houses in Uganda.
The good performance of this section [Residentials], Mukembo says, will most likely result in an increase in demand for credit, including mortgages.
“Consequently, there should be a marked increase in volume and value of residential mortgages this year, although unfortunately commercial mortgages will continue to decline as banks remain cautious of speculative activity in the segment,” he says.
He also adds that the year 2019 will see property developers have an improved sales velocity as more upbeat, confident consumers look for good deals.

“The affordable housing segment will see the best performance, especially in demand for “starter” homes. The formal housing market will continue to be concentrated in the Greater Kampala Area, especially in the Kampala, Mukono, and Wakiso Districts, and their immediate neighboring boroughs. Given the cost of land and other factors of production, and considering good urban planning principles, we should also see an increase in densification in these areas – being the construction of multi-family rather than single family housing units,” he explains.
As the year goes on, Mukembo also says that incremental construction will become even more mainstream as more mortgage lenders embrace the segment with offers for construction, extension and other products aimed at encouraging and supporting low and lower middle-income earners to transition to owning formal housing.

How the sector will fare in the long term
New players
“Sophistication of primary players and intermediaries like banks, property developers, valuation surveyors, commercial tenants and other users, real estate agents, lawyers, and so on, might come on board in 2019 as the market formalises in search of a larger scale and more complex opportunities,” Arthur Mukembo predicts.
He explains that this will lead to demand for specialised training and designations aimed at creating opportunities for distinction for practitioners.

“You will begin to see licensing of real estate agents – “brokers”, artisans, casual labourers and so on. This will result in more sophisticated real estate investments, business models and transaction types such as rent-to-own, buy-to-let, real estate investment trusts, exchange traded funds, sell-and-leaseback, and build-own-operate, among others, as investors seek higher return on investment amidst increasing sophisticated competition,” he predicts.

Government policy
With government’s policy towards businesses such as creating special economic zones and industrial parks across the country, infrastructure investment, reducing cost of raw materials, utilities, credit and other factors of production, and the potential for comprehensive tax review, the real estate sector is likely to benefit from this kind of policy.
For instance, the reduction of the cost of raw materials and increased credit towards the real estate sector will most likely bring about double digit growth for the industry and the entire economy in the medium term.
In the long run, Mukembo says the sector will see double digit growth for the economy in the medium term saying that:

“The new economic wealth generated will stimulate consumer demand for goods, services, and credit and investment opportunities like real estate offers – one of a few asset classes that generally continuously appreciates in value over its lifetime. In summary, we will see more investment in real estate,” he predicts. Sabiiti Bageine, the Executive Director Property Management and Consultancy, Bageine & company Limited, too agrees with Mukembo noting that there will be an increased demand for property.

Additonally, RE/MAX-Uganda regional director Arthur Mukembo, says there will be more regulation of the real estate sector this year as government, policy makers and the public, continue to recognise the quantum of economic multiplier effects and systemic impact the real estate sector has on the economy.
“By doing so, government will have seen how letting the real estate industry, and by extension, the finance industry, flourish, will perhaps be the single largest driver of an explosive growth in household wealth across the country,” he adds.

Land wrangles
Kalule William, a real estate developer, says land wrangles, will most likely be less this year as a result of and enforceability of rule of law by the government. Arthur Mukemebo also points out the same issue saying that: “The government has tried step up its efforts in fighting land grabbing in Uganda, so chances are high that with more effort by the state, then land grabbing will most likely be less this year,” he explains.

He also adds that advantages enjoyed by property owners will properly be enshrined across all communities in the country.
He says: “Perhaps the most important critical success factor in the sector is that where a buyer purchases land, they should have the confidence that the piece of paper or other identification they are issued as testament to their interest, is indeed a sufficient measure or evidence, without fear or worry.
“We should all come together today as a country to urgently address this issue fundamentally, without prejudice, if we are to make good money from real estate.”

Residential units
Uganda’s urban population has been on the increase for the last three decades or so.
According to Uganda Bureau of Statistics, Uganda’s urban population stood at 13.3 per cent in 2006. By 2016, this number had gone up to 16.4 per cent.
The ever increasing number of people who are continuously settling in urban areas is, according to Michael Musoba, an urban planner, likely to bring about an increase in demand for residential units in urban areas.
“The ever increasing numbers of people in urban areas,” Musoba adds, “is a sign that the players within the real estate industry can even profit more if they operate under one umbrella.”

More online presence
In 2018, most real estate agencies made an effort to have an online presence. According to Rachel Mbabazi, a digital marketing expert, this was so because of the ever increasing number of people in Uganda who have the capability to access the internet.
She also predicts that: “The presence of agencies online will increase this year. This year though, the presence of most real estate agencies will be more vibrate.”
Real Estate agencies have been majorly felt on social media platforms like Facebook, twitter, and Instagram, among others besides the agencies’ official websites.

Non-urban area activity
For the last one or two decades, real estate development has been majorly concentrated in urban areas.
However, there seems to be no more space for real estate development in most urban areas, especially in the country’s capital, Kampala.
This partly means that developers are likely to focus more on areas beyond urban areas. This kind of strategy according to Musoba will be better implemented in the following years unlike before.
“Some people have re-awakened to the fact that there isn’t enough space in most urban areas. Some also prefer quiet places like those ushering in their retirement. Today, it can be rewarding for one to invest in real estate development beyond urban areas,” he says.

2018 Performance
Last year, as earlier mentioned, the industry fared well. This came as a result of a number of developments that helped bring about this.
According to the Uganda Bureau of statistics second half GDP report 2017/18 saw the Ugandan economy momentarily reach a 6.6 per cent growth in 2018. This was higher than 2.8 per cent economic growth recorded in the first half of the financial year.

The report further indicates that all sectors of the economy recorded better performance in financial year 2017/18 compared to 2016/17.
This partly means that the real estate sector performed fairly well despite challenges such as a continued poor performance of the Ugandan shilling against the dollar.
To further understand how the sector fared, it is imperative to look at how different sections of the industry performed. From residential, offices and retail among others. Below is a look at how the sector performed:

Residentials
Venturing into residentials, both buying and selling, is a common practice by most real estate dealers in Uganda.
According to a Knight Frank report on market performance, 2018 saw the real estate consultancy record a 10 per cent increase in the supply for residential property during the first half of 2018 compared to the same period last year.

The consultancy also recorded a 9 per cent increase in demand for residential property for rent in the secondary residential suburbs of greater Kampala, particularly Kira, Najjera, Kyanja and Naalya. According to Francis Bbosa, a consultant and lead researcher with Knight Frank, the good performance of the industry could have been so because of an increase in the stock of newly constructed residential properties in the middle income segment. Other players in the industry such as RE/MAX Real Estate Agency, also registered a better performance compared to the previous years.
performed:

Residentials
Venturing into residentials, both buying and selling, is a common practice by most real estate dealers in Uganda.
According to a Knight Frank report on market performance, 2018 saw the real estate consultancy record a 10 per cent increase in the supply for residential property during the first half of 2018 compared to the same period last year.

The consultancy also recorded a 9 per cent increase in demand for residential property for rent in the secondary residential suburbs of greater Kampala, particularly Kira, Najjera, Kyanja and Naalya. According to Francis Bbosa, a consultant and lead researcher with Knight Frank, the good performance of the industry could have been so because of an increase in the stock of newly constructed residential properties in the middle income segment. Other players in the industry such as RE/MAX Real Estate Agency, also registered a better performance compared to the previous years.