Where to invest in real estate
Sudhir Ruparelia is a real estate mogul in Kampala who has found his niche in mainly commercial real estate by heavily investing in the Central Business District. At the sale of his Crane Bank last year, Sudhir continued to earn rental fees from DFCU Bank since the properties housing the bank are managed by his real estate company.
The real estate sector is a lucrative industry to invest in. However, industry experts suggest that before investing, it is important one considers the type of real estate with higher returns on investment depending on your budget.
Commercial real estate
These are majorly shopping centres, office spaces, retail, malls, hotels, medical and education facilities. These are constructed to generate income from rent or through sales.
While investing in commercial real estate, a key factor to consider is the business area.
Phillip Muhooja, a real estate agent at Spectrum Real Estate Investments, says: “Proximity to the main road or any highway is important for a commercial property. That will determine the value of commercial real estate.”
However, Muhooja advises that while constructing a commercial property, it is important to consider the residential areas as more people want services near them. These include hospitals, malls, supermarkets and schools.
For instance, Quality Shopping Village Mall in Namugongo is situated in a residential area to serve the middle class residents of Naalya and Namugongo. The mall has different services such as banking, insurance and houses cafes, and supermarkets for convenience of the residents.
While there is a good number of commercial properties on sale, Muhooja says make sure the property is of the right price, negotiate in that line, consider the time period for returns on investment. An overpriced property has a longer time on returns on investment.
Buying property at Shs2b in Seeta, Mukono may have longer returns on investments compared to buying property in Kololo at a similar price. In simple mathematics, Muhooja says, buying and renting out such a property in Kololo, an upscale Kampala suburb, has a shorter return on investment.
Land in real estate includes working farms, ranches and vacant land.
Today, more people are involved in sale of land especially in rural areas for agricultural purpose. This kind of land is sold in hectares and each hectare is costed at a unit price.
This is all sold or rented out in the real estate business. The land is of different sizes and the price depends on the size of the land and the location. Land is also subdivided into categories.
Robert Sekalala, a land broker in Nsasa cell in Kira Municipality, says in subdivision, a large piece of land is divided into smaller manageable plots and sold off to different owners either at the same or different prices.
Each person who has bought the smaller pieces of land gets titles for them to show proof that the land now legally belongs to them.
The common plot measurement is 50ft 100 feet for an estate with roads network, title, water and electricity extended.
“If you buy land and there’s no water, electricity, or a good road network, people are not likely to buy your plots of land. It means every person who will buy your land has to extend power or water which will create chaos,” he observes.
Sekalala explains that this involves buying vacant land ahead of development and selling later.
This kind of land is sometimes referred to as wild land. It lacks resources and has no infrastructure on it. This kind of land is found in upcoming areas on the fringes of urban centres.
Lukwago advises that the value of such land will appreciate in the future once development moves and a person can reap the benefits. Land banking has a five to 10-year returns on investment for busy urban centres.
For instance, most rapidly developing suburbs around the city were once bushy with murram roads, and few services in last few years. Sekalala says those who invested in land in such areas are reaping profits.
“There were no schools, the roads were narrow and murram especially in early 2000; but most of the suburbs around Wakiso have changed!”
“Do research before you proceed to buy, people in the diaspora use relatives and don’t do research. The agent or company you will use in scouting land must be vigorously researched about.
A good real estate company has an address, website and, on the search engine, there are reviews,” Muhooja advises.
According to Sekalala, land assembly is where smaller pieces of land are joined to form a single site for redevelopment or development. This is mainly for large scale commercial purposes.
Residential real estate involves houses for sale and newly constructed rooms that are rented out. They include bungalows, single and double rooms, condominiums and some apartments are also known as residential.
Muhooja advises that when building houses for sale, clients need close services such as schools, hospitals, supermarkets, shopping centres. This is to avoid inconveniencing people or clients. Consider the size of the property. Most people who buy property want spacious rooms.
“How many bedrooms are you looking at, how many square metres, if you are building condominiums, consider the square metres are habitable for each. If you are selling small space and tiny, then clients may not find that property attractive.”
When investing in real estate, the key thing is to know your budget. Muhooka says currently, those investing in real estate should expand their scope to people in the diaspora if the local market is not doing well.
This involves buildings that can be used as storage centres, research grounds and centers for distribution of merchandise as well as small and large scale industries.
The Uganda Investment Authority has land to potential investors in different industrial parks across the country through leasing for a specific period of time.
However, the Authority reserves the right to withdraw the lease incase the investor fails to utilise the land.
If you are to set up an industry in an industrial zone, you need license, and documentation to set up a particular industry.
A commercial investor needs approval from the district, town council and NEMA for the Environmental Assessment Impact survey.
Muhooja says when investing in ware houses, you need to be strategic on the clients.
“If I am a building a warehouse for storage, I need to look at areas around airports, URA, clearing companies near border posts, bonded ware houses where people are going to keep their goods,” he advises
However, while investing in a warehouse, height and size are important especially during loading and offloading of goods.
Usually land for industrial real estate ranges from one acre and above.
For a serious real estate investor, website guides on industrial real estate can link you to prospective customers across the world.
Politics and real estate
The political factor has a major effect on all types of real estate sector. Toward elections, people in the diaspora and foreign investors hold their money due to speculation. Even those who have invested leave the country to wait for the situation to normalise.
However, there are people who take advantage of this period to invest in real estate.
Real estate hotspots
Hotspots for commercial real estate include major towns in Uganda such as Gulu, Mbarara, Fortportal, Mbale, Masaka, Jinja, Arua, Hoima, Kampala, Entebbe, Wakiso, Mukono and other mushrooming towns. Target market for commercial include government, NGOs, educational institutions and private companies.
Industrial real estate hot spots include industrial parks, airports, border points such as Malaba and Katuna, water ports mainly around Lake Victoria, Kyoga and Albert and undeveloped land in other parts of the country. However for industrial real estate, infrastructural development in terms of electricity, water and roads are necessary to attract potential clients. Target market includes foreign investors, industrialists, private companies and government.
Residential real estate hotspots include mainly residential suburbs in towns across Uganda. The target market for the houses may range from low, middle and high income. Potential clients for residential include: expatriates, corporate employees, educational institutions, and government.
Land. Hotspots include undeveloped land on the peripheries of towns, idle land in upcountry areas, and titled land from real estate companies. For your target market, consider industrialists, commercial real estate developers, government, corporate employees, and business people.