How to get Housing loans  using retirement benefits

Houses erected next to the railway line  in Namuwongo, Kampala. Last week, the government indicated that more than 40,000 people in urban areas lack decent housing facilities. PHOTO / ABUBAKER LUBOWA

What you need to know:

  • Eligible members will have to secure a letter for the loan or mortgage from a legally licensed financial institution.

Members of retirement schemes who successfully secure a mortgage or loan for housing development using their accrued benefits as collateral have been given a period of 20 years to complete repayment.
“The repayment period for a mortgage or a loan for purchasing a residential house …shall not exceed 20 years,” Clause 10 of the Uganda Retirement Benefits Regulatory Authority (URBRA) Assignment of Retirement Benefits for mortgages and loans Regulations states.
The regulations issued by the URBRA give a go ahead for people of a licensed retirement benefits scheme who has been members for 10 years, or are out of a job to assign up to 50 per cent of their benefits as collateral for housing development.

But before the assurance of the two decades, eligible savers will have to undergo extensive processes dictated by the regulator, the retirement scheme and financial institutions before they secure a mortgage or loan.
Details in the regulations show that eligible members will have to first secure a letter for the loan or mortgage from a legally licensed financial institution, before making an application to their retirement scheme seeking approval to use their benefits as collateral.
“A member shall, upon obtaining a letter of offer for a facility, apply to the trustees to assign a proportion of his or her accrued benefits as security for a mortgage or a loan for purchasing a residential house,” clause 7(1) of the regulations states.

The eligible applicant will then fill a form, with particulars, including the name of the applicant, scheme and membership number, the total amount of benefits accrued and the percentage they would like to assign and the licensed financial institution they intend to secure the loan or mortgage.   This will have to be accompanied by a written commitment to pay the mortgage or loan in according with the terms agreed with the financial institution.
On the form, the applicant is also required to show proof that the loan is indeed for a housing project by indicating the location of the property. The regulations have limited the loans for acquisition of a residential house, but concerns of diverting the funds are not absent in the minds of the regulators.

Mr Martin Nsubuga, the URBRA chief executive officer, in a telephone interview on Wednesday said the regulations empower the scheme and financial institutions to set up rules that will further streamline the processes to protect all parties.
“It is like getting a loan from the bank, and you give a purpose. There are challenges they face is diversion of funds. In this case, the trustees (board of directors) have a duty to monitor the implementation and ensure their member use the funds for the specified purpose,” he said.
The form also contains a clause that binds the applicant on repayment, and authorises the retirement to scheme, in case of default on repayment, to tap into the members benefits to settle the obligation.

Retirement schemes have been allowed 30 days to review the application. There are 64 licensed retirement benefits scheme providers. But by press time, members of the biggest retirement scheme were locked out of the benefit due to a contradicting law.
In the event that one successfully acquires approval from their scheme, they then will enter a deed of assignment with the financial institution they intend to secure the mortgage that states the sum to be advanced.  Four members of the board of the retirement scheme will also have to sign as witnesses on the deed.
The regulations have also tasked the banks with the duty of keeping track, by regularly updating the retirement scheme on how the loan is being utilised.