Uganda needs a regulatory framework for budding real estate sector-expert
ARTHUR MUKEMBO, a real estate expert, is the regional director, RE/MAX Uganda. He is also a board member of the Association of Real Estate Agents of Uganda (AREA-U). The Infrastructure Magazine’s Martin Ariko sounded him out on various issues regarding the country’s budding real estate sector.
What do you think should be done to accelerate the growth of Uganda’s real estate sector?
Uganda’s formal real estate sector is still in its infancy – there is a lot of opportunity and room to improve.
Real estate – like oil & gas, Uganda Airlines, agriculture, infrastructure or banking – should be a major focus for government under the National Development Plan or other planning processes. In economies in Europe, North America and Asia, the growth of the housing sector is reported monthly at the national level as a key economic indicator because of its considerable impact on other sectors of the economy and the Gross Domestic Product (GDP). To appreciate the impact of real estate, you can recall that subprime mortgages in the United States of America; a primary contributor to the 2008 global financial crisis was activity in the real estate sector.
There is need for reliable real estate sector insights and data such as on new housing stock by type and area of the country, new mortgage contracts and their average values in a given period, actual strike prices of transactions for comparison against asking prices, demand metrics and so on. Without reliable, comparable data to support decision-making, project risk increases and this reduces quality, volume and scale of investment into and transactions within the sector.
There is need to professionalize and regulate real estate agents/brokers. There has been a draft bill by the Ministry of Lands & Urban Development intended to regulate actors in the sector since around 2013. This bill should be fast-tracked alongside the ongoing consideration of the Landlord Tenants bill.
We need reliable sanctity of title. As a sector player, I hope the ongoing Commission of Inquiry into Land Matters yields real, considered, extensive and effective recommendations that will be duly implemented with the same vigor as the commission’s activities.
Generally, there is need for either a statutory authority or semi-autonomous professional standards body similar to the Law Council or Nurses and Midwives Council, dedicated to regulating the conduct of built environment professionals such as real estate agents, architects, contractors and engineers, and to creating enabling policies and regulations to drive sustainable development of the sector.
What is the contribution of real estate to Uganda’s economic growth?
To put it in context, the Uganda National Housing Policy estimates the contribution of the real estate sector to be about five per cent of the GDP. The Uganda Revenue Authority estimates Rental Income Tax contributed about 0.3 per cent of Uganda’s GDP in the last financial year.
However, even with these guiding figures, the multiplier effect of real estate developments reverberate across multiple sectors and so are difficult to quantify accurately. For example, a single real estate development consumes construction services, construction materials, utilities, casual laborers, skilled professional services such as architects and engineers, occupiers, credit from financial instructions, infrastructure, transportation, and so on – how do you reliably measure all this impact?
Real estate is a major direct and indirect contributor to the country’s GDP and should be a key focus area for the planning authorities.
Do you agree with some market observers who suggest that there is an emerging trend of property acquisition in this country, where Ugandans prefer to buy completed properties rather than build by themselves?
Given income levels, cultural context and other restraints, most households in Uganda start out by renting. Subsequently, they purchase parcels of land and then develop them overtime in what is referred to as “Incremental Housing”.
We are seeing overtime, however, especially following the introduction of the Condominium Property Act of 2001, an increase in the supply of Site and Service schemes such as those by Akright and Jomayi, among others, and in master planned developments that incorporate apartments, townhouses and villas such as the Royal Palms estate in Butabika and Venus enclave in Najjera.
We observe, however, that regardless of whether homeowners buy or build for themselves, income levels, cultural context, infrastructure, construction cost, and cost of housing finance remain major impediments to sustained growth in effective demand for formal housing options. There are simply not enough prospective homeowners with a combination of desire and ability to purchase or construct in a single phase, today.
We are innovating alongside our clients, especially financial institutions and developers, and with intermediaries such as members of AREA-U, to reduce lending and project risk to bring down cost of project and housing finance, ultimately.
Would you say that on average, the size of land Ugandan homes are built on today is smaller, compared to the past?
I do not think plots are becoming smaller. Instead, as you would expect, given rising cost of land, property owners looking to sell their land have to adapt to market forces by offering products that prospective buyers have the ability to purchase. One way of doing this is by subdividing a large parcel of land into smaller theoretically more affordable parcels for punters to purchase.
Another factor is densification. You derive better value from land in highly urbanized areas, such as the Greater Kampala Area, by optimizing land use. This can be achieved using a range of strategies such as introducing variety in what you sell – offer a mix of serviced lots, apartments townhouses and so on; building vertically; increasing a structure’s footprint on a given piece of land; and building in accordance with the master plan for the area in which your site is located. These factors contribute to why you may be observing smaller plots and to why multi-storey structures are increasing in supply especially in urban centers like the Greater Kampala Area.
Briefly tell our readers who RE/MAX Uganda is
RE/MAX Uganda is part of the global RE/MAX network of over 120,000 real estate professionals in 7,500 offices, in more than 100 countries and territories. RE/MAX Uganda offers consultancy solutions in valuation, land surveying, property management and transaction support for residential and commercial real estate.
Specifically what kind of real estate business do you deal in?
We advise financial institutions, property developers, organizations and individuals. Our advice cuts across the real estate value chain from property acquisition through to project conception, raising financing, construction, transactions and at occupancy stage. We support our clients and partners in undertaking market studies, assessing the value of assets, putting together project concepts and consultant teams, monitoring of construction work in progress, and eventually, managing the built-up asset, among others.