Akamwesi hostel in Makerere Kikoni. Photo | Courtesy
Student hostels, elderly care homes and high grade residential apartments suitable for oil and gas industry expatriates may be investment saviours in Uganda’s real estate sector.
And in spite of high interest rates confronting local entrepreneurs, players say the gap in these sectors is promising huge returns for those ready to ride the risks.
Local universities account for more than 70 percent of student enrolment in tertiary institutions according to data compiled by Uganda Bureau of Statistics (UBOS).
The high student enrolment in universities - a prominent economic growth driver in both urban and rural communities, usually translates into huge demand for social services that include accommodation, medical care, transportation, entertainment and fast food deliveries among others.
The overall student population in Uganda’s tertiary education institutions - vocational schools, medical training colleges and universities is estimated at more than 300,000 to date according to recent official data.
Student enrolment in tertiary institutions is largely driven by rapid growth in the number of private universities, higher admission rates and the influx of foreign students originating from Kenya, Rwanda, South Sudan, Democratic Republic of Congo (DRC), Somalia, Nigeria and the Comoros among others.
“We have received fresh inquiries from foreign private equity firms about investment opportunities in student accommodation available in Uganda,” said Moses Dennis Lutalo, Managing Director at Broll Uganda, a commercial real estate agency.
“There are some investors who are interested in building student hostels with 2,000 beds plus optimal utility services and customised physical designs. There is one project focused on student accommodation that has just taken off while four similar projects are already in the pipeline.”
Lutalo said other investors have made inquiries about new opportunities for investment in elderly care homes that are located in upcountry towns but anchored on sophisticated designs, while oil field services companies have expressed interest “in large, high grade apartment blocks that can accommodate dozens of expatriates in one place.”
The total number of students enrolled in Ugandan universities rose from 140,107 in 2013 to 180,360 in 2014, UBOS figures show. Total student enrolment in Ugandan universities grew to 186,412 in 2016.
Whereas Uganda’s elderly population remains small, shortage of family care givers capable of looking after old and sickly people above 65 years of age has somehow triggered demand for sophisticated care homes located in cities and towns, sources say.
The overall number of elderly people above 60 years of age stood at four million in 2020 but dropped to 3.7 million in 2021 according to UBOS data. The total number of elderly citizens remained stable at 3.8 million in 2022 and 2023.
For Ugandans, however, the sector still has stumbling blocks that could lock out many. Allan Lwetabe, a financial analyst and Investment Director at the Deposit Protection Fund of Uganda cited the high cost of credit that has gone over the rate of 20 percent per year is discouraging.
“As a result, there are many small real estate projects likely to come up this year that are largely informed by credit access constraints. On the other hand, foreign investors like private equity firms and Ugandans living in the diaspora are bound to take up new but huge opportunities in the real estate sector this year,” he said.
The Deposit Protection Fund of Uganda says the average cost of credit in developed economies is around four percent while big real estate projects in Uganda offer a minimum return of 10 percent per year.
In Uganda, average commercial banking lending rates increased to 19.1 percent between August and October 2024 compared to 18.1 percent registered between May and July 2024. This was under pressure from tight liquidity conditions experienced in the banking sector, according to Bank of Uganda (BOU) data.
For Uganda, foreigners are willing to pay more because it is a safer environment compared to their home countries.
“There are many people from South Sudan and DR Congo who have migrated to Uganda of late because of political instability at home. Some of those people are willing to pay as much as $500 per month in rental charges for residential apartment space while Ugandans are willing to pay $300 for the same space.
“I’m keen on buying more land and investing in a bigger structure this year that could take five years to complete but with little debt on my hands,” said Phillip Sendawula, a local property owner.
