To rent or build, what is better?

The rent you use over 10 years could be enough to build you a three bed-roomed house, writes John K. Abimanyi

Bryan’s story is a script of an archetype life. He had been to the best schools in the land and he is already self-employed.
He set out to find a modest house by his standards to act as his post-school-life address. Together with a couple of other “home-seekers”, he ventured into Kisaasi to house hunt.

“At first, we passed a few houses, which looked extremely beautiful,” he says. “We chose to drive on until we found some houses that were modest. They were well-stocked and furnished apartments, which were safely enclosed in a secure compound.

Golden price

“We wanted two bed-roomed houses, so we asked a lady the house price. She instead offered to take us around first, and we were awestruck by the beauty of the place until she dropped the bomb that the houses cost $2,000 (Shs3.7m) per month.”

Bryan says he tried to hide his shock. “We first spent a few more minutes admiring the place and then said we would return. The truth is; we could not go back. Besides, I did not have that kind of money and even if I had it, I wouldn’t spend it on renting. With approximately Shs4m per month, I could have built a nice house with that money by the end of the year,” he says.

Choosing an abode today, Bryan’s dilemma rings a bell. Building a house that somebody will call their own is by far more important than renting, however majestic the rented house is.

Varied takes

Some people stress that renting is expensive compared to building a house. “I would not spend more than Shs500,000 on renting a house, unless I have run out of what to do with the money,” says Agnes Apio, a librarian.
Mark Keith, a journalist, says he would not rent a house of Shs2m per month because he can mortgage one at Shs1m, and own it in the long run

Mr Ronnie Ruhinda, the head of property management at A.N. Consult limited says if one has the money, they should not waste it on renting. He advises that after one graduates from university, and gets a job, their first year should be spent at their parent’s home while stabilising.

After a year, they could then opt for renting a house in the ranges of about Shs250,000. Such a house could have a sitting room and two bedrooms, which should be fine for a start. “It’s after one has been confirmed at their jobs that they can opt for a salary loan from a bank. The loan will them help them to buy land so that they can start building or get a mortgage. No bank will give you a mortgage if you have no stable job, or land,” he says.

Mr Ruhinda adds that if a couple is making enough money, they are better off investing it in a house than renting. You will find that building a house is actually cheap and the money you spent renting could have been used to build a house.

In a situation where a couple is earning Shs1,000,000 per month, and spending over Shs500,000 on rent a month, the annual amount spent on rent would mount up to Shs6m, which is more than enough to acquire a 50 by 100ft piece of land, as advertised by many real estate agents today, and leave you with some change to spare. Five years down the road, the annual rent would have accumulated to Shs30m, which would contribute a reasonable fraction of your house’s total cost.

Like Mr Ruhinda advises, if one does not have all the money at a go, they could get a salary loan, or a mortgage from a bank that could allow them to continue with their building project as the money is deducted from your salary at a small interest.
Other sources of such money could be from other assets like land, which is unfavourably located, an inheritance or a loan from a close relative or friend, which could come at a lower interest rate.

Why build?

Mr David Mukasa, a teacher in Kireka, started his renting journey in Makindye and on to Ntinda, which lasted for five years. “I did not feel free to even pin a nail in the wall. At first, the house did not have electricity and it was hard to get the landlord to co-operate and install electricity in the house,” he says.

After two years of renting, Mr Mukasa chose to bear the financial constraints and started building. “We had to cut down on our spending at home because we were investing in our children’s future,” he says. “In the four years that we spent building, I don’t think I bought a single suit,” Mukasa adds.

“I moved into my house before it was fully completed and I did the final bits after settling in. Stopping to rent gave me the satisfaction of having a home I could call my own. If you stay renting for long, you never get to develop as a person,” he says.
But even with such sentiments, all around Kampala are pieces of real estates that are charging seemingly insane monies as rent for houses. There’s a bunch of people stocking them to the fill.

One of those is Peter. He rents a Shs1.8m flat in Mbuya, on the hill that overlooks Luzira, Kitintale, and Mutungo. But it’s easy to understand why Peter rents such a costly cottage. It’s not him that feels the pinch after all. Peter’s housing needs are met by his employer, a telecommunications company, which duly dishes out the Shs1.8m every month for the rent.

If you can afford to splash out Shs2m on rent every month, go ahead. It’s just that by the end of the year, somebody else would have built a house, with just as much money.