5 years later, govt fails to fund National Housing project

The promise came against the backdrop of a 2007 court order that put paid to a private initiative, the Nsimbe Holdings, a joint venture between Mugoya Estates and Premier Development Company

Progress. Officials of National Housing Construction Company and members of the public tour parts of Namungoona Housing Estate during its’ commissioning last year. (PHOTO BY STEPHEN OTAGE) 

BY ISAAC MUFUMBA

IN SUMMARY

Daily Monitor position:

  • Government needs to address the issue of capitalizing Housing Finance Corporation and by extension Housing Finance Bank in order to make mortgages accessible to most low income earners. Uganda did register improvements in the energy sector by creating Energy Fund. It is making major inroads into the roads sector thanks to creation of the road fund. The country could borrow a leaf from the two sectors and create a Housing fund for purposes working towards improving the housing conditions of most Ugandans.

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The Promise
In the run up to the 2011 general election, the ruling National Resistance Movement (NRM), published its 2011-2016 manifesto in which it committed itself to taking steps to address the country’s rising housing deficit.
“In order to reduce on the housing backlog in the urban areas the NRM will provide land and physical infrastructure to private real estate developers,” read the manifesto in parts.
The NRM also promised to “capitalise National Housing Corporation to be a lead agency in providing housing in urban areas”.

The promise came against the backdrop of a 2007 court order that put paid to a private initiative, the Nsimbe Holdings, a joint venture between Mugoya Estates and Premier Development Company, a subsidiary of National Social Security Fund (NSSF), which would have seen about 5000 housing units constructed along the Masaka Kampala highway at a cost of $225million.

The project was halted after court ruled that the joint venture was unconstitutional because the Attorney General, who is Government’s legal adviser had not appended his signature to it.

It also came following the release of findings of a housing value chain study carried out by Ayani Inclusive Financial Sector Consultants with funding from Habitat For Humanity International. The study was aimed at helping financial institutions working around the housing sector to increase their ability to provide affordable products to promote access to housing for low income earning communities in Uganda.

The study targeted individuals with earnings of below $10 per day or a monthly income of less than Shs750,000.
Findings from the study, which was carried out in 2010 had revealed that Uganda had a housing backlog of about 1.6 million units, which represents a housing deficit of 211,000 units in urban areas and about 1.4 million units in rural areas.

With an urban population growth rate estimated at 4.8% per annum and a national population growth rate of 3.5% per annum, it was projected that the population which was estimated to be within the region of 33.4 million and would have increased to 45 million by 2020 and that the housing backlog would shoot higher up unless something was done to address the problem.

The housing backlog was largely associated with difficulties that low income people experience in acquisition of legal certificates of title; failure by local governments to provide basic infrastructure such as roads and power and water lines; and failure by the low income earners to access financial and non-financial support services.
Increasingly cash strapped local governments could neither open new roads nor help developers to get piped water and electricity service lines to properties under development. The NRM’s promise to help private real estate developers was therefore a welcome gesture.

The arrest in 2003 of Property Master’s boss, Mr Robert Kasulu, and his subsequent decision to file for bankruptcy as hundreds of his former clients demanded for certificates of title to land that he had earlier ‘sold” to them served to demonstrate the difficulties that low income earners experience in the process of land acquisition.
A related study by Access to Housing Finance in Africa had revealed that out of 5.2 million households in the country, only 0.68% can access mortgage loans through commercial banks, 19.95% can access HMF loans through microfinance deposit-taking institutions (MDIs), 7.2% can access loans from microfinance institutions (MFIs), 10.3% can only access loans through Savings and Credit Cooperatives, while a whopping 62.3% have no access to financial services.

The value chain study was therefore partly aimed at examining market systems, regulations and processes for purposes of enhancing and the delivery of financial products and services that would kick start access to decent housing.

Status
More than five years since the promises were made National Housing Corporation has not received any capitalization from government to carry out any low cost housing development projects.
Private developers have also never been provided with the promised land and infrastructural development support.
The closest move in that direction was the launch in May 2016 by the then Minister of Lands, Housing and Urban Development, Mr Daudi Migereko, of the revised National Housing Policy, which among other things creating an environment that will lead to “increased production of adequate housing for both rental and owner occupation, so as to address the housing backlog and housing need and increase access to adequate and affordable housing for all income groups”.

According to a copy of the policy, the “aim is to progressively increase the production of new houses from the current annual estimate of 60,000 units to a new level of 200,000 units annually by 2022”.
Official Position
The Chief Executive Officer of the Corporation, Mr Parity Twinomujuni, told Daily Monitor that well as the Corporation has constructed more than 500 housing units and apartments since 2011, none of them are for low income earners.
Some of the projects that have been worked on include the 268 units’ estate at Kiwatule, the 132 units’ estate at Namungoona and the 104 units’ springs apartments.
“The only low cost housing project we have tried to undertake is that of Bukerere, but we are still out there in search of finances. Government has never capitalized us since inception. Even when the Libyans came in the only thing that they did was to sell of their shares. Whatever we are doing has been with money from commercial banks,” said Mr Twinomujuni.
He said that it does not make business sense to go into low cost housing projects when the source of funding is commercial banks, which charge interest rates of up to 20 percent.
“We would not have minded much even if we are not being capitalized, but the problem is that government is not even paying us what it owes us! They owe us about Shs20bn” he said.
Among the government departments that owe the company money are State House, the Ministry of Defence and the Uganda Land Commission (ULC).

Impact
Failure by the government to live up to its promise has meant that the shortfall in the country’s housing needs remains high. This is partially responsible for the prohibitive rent that is demanded for by landlords in most of the urban centers of the country.
According to the Centre for Affordable Housing Finance in Africa (CAHF), there were slightly over 6000 mortgages across the country as of January this year with the highest standing at $30000 (approximately Shs108,502,371) and the lowest interest rates on mortgages stood at 22 percent and required a down payment of at least 30 percent. Such figures put mortgages out of the reach of low income earners. That makes it impossible for them to improve their housing and living conditions.
Lack of affordable construction finance for large housing estates also remains a big challenge. As a result, private property developers are compelled to borrow from commercial banks at very high interest rates. This hampers growth of the housing sector.

Daily Monitor position

Government needs to address the issue of capitalizing Housing Finance Corporation and by extension Housing Finance Bank in order to make mortgages accessible to most low income earners. Uganda did register improvements in the energy sector by creating Energy Fund. It is making major inroads into the roads sector thanks to creation of the road fund. The country could borrow a leaf from the two sectors and create a Housing fund for purposes working towards improving the housing conditions of most Ugandans.
Making such funds available might also compel commercial banks to revisit their interest rates and lending conditions.
One of the biggest causes of the recent unrest in city has been the high rent charges that landlords are demanding. Reduced mortgage and interest rates might translate into a reduction in rent and by extension the cost of doing business.
Where this cannot be achieved, government should consider incentivizing the private sector to enter into the area of constructing low cost houses. For a start government could offer tax discounts and rebates to private developers who enter that market once they put on the table well planned housed housing estates for low income families. In the same breath, a developer who recommits the little profits gained off the first low income housing estate should be allowed to other incentives such as tax waivers on some imported building materials and accessories.

VOICES

“We are discussing the ministry’s policy statement, which partly seeks to address the rising housing deficit across the country. We want to see what provisions have been made in the Budget for the financial year 2016/2017. Of course money cannot be availed to fully capitalise National Housing Corporation address the problem right away. It has to be a gradual thing, but we must begin somewhere.”
Ms Lillian Nakate Ssegujja, Luweero Woman MP (NRM) and Vice Chairperson of the Parliamentary Committee on Physical Infrastructure”

“We are having constraints in providing direct funding. Our priority is agriculture, but incentives have been given to try and boost housing. Excise Duty on cement was reduced by Shs1000 last year. The idea was to keep the prices of cement down and make it affordable. That is in immediate, but in the medium term there are other options like making savings that in gainful employment have with National Social Security Fund (NSSF) available to people to be able to build houses.”
– Mr Henry Ariganyira Musasizi, MP Rubanda East (NRM) and Chairman of the Parliamentary Committee on Finance, Planning and Economic Development

“Government has not provided the resources so as a council we have moved to help especially women construct two bedroom houses. Once the women work and donate iron sheets to any one member of any of their many groups, then the beneficiary comes to us. We survey and allocate the person the land to ensure that they do not build on road reserves. Next we provide them with building plans free of charge and we also do not charge them any building fees.”
Mayor of Gulu Municipality, Mr George Labeja

“Jinja town initially had a number of low cost housing units in Walukuba and Mpumudde Housing Estates. The council used to rent them out to mostly the urban proletariat who were working in our factories. While that was helping with accommodation, it wasn’t really helping to address the issue of ownership of decent accommodation in the urban areas. The Council therefore made a decision to sell most of the units to the sitting tenants. Though the Council has retained some units, it has gone a long way towards addressing housing shortfalls.”
Bernard Mbayo, LCIV Secretary for Works and Housing, Jinja Municipal Council.

imufumba@ug.nationmedia.com

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