Which Way for Uganda’s Housing Challenge?

Published on 12th December 2010

Recent reports reveal that Uganda and Kampala in particular is lacking over 5000 housing units leaving dozens of Ugandans grappling for decent housing. Landlords have taken advantage of this scarcity to charge exorbitant rent which makes the renting business a sellers market with little influence from the consumer. The housing challenge is further compounded by the exploding population growth in the country. Experts suggest that the population is likely to reach a staggering 55m by 2020 and the key question in light of this revelation is, what is being done to effectively manage the country’s resources for long term optimization.

Decent housing continues to be a challenge not only for Uganda but for many African countries. Key market players notably Real estate developers and banks have attempted to address the challenge unfortunately, there are clearly flaws in some of these efforts. Mortgage interests still remain high and real estate developers focus on the premium clients with the low cost consumer being largely ignored. Uganda boasts of developers like Akright Housing, Kensington Luxury Heights and the state owned National Housing and Construction Corporation all of which have catered for the needs of the high end and middle income bracket while most of the low end clients are left with few or no alternatives. Sadly, like in most African nations, National Housing programmes may in principle be holistic however actual implementation is left wanting. What we see on the other hand are interventions from humanitarian organizations like Habitat for Humanity which has over so many years promoted housing in Uganda through construction of low cost houses. Kampala’s housing scene is characterized by pricey posh accessorized apartment blocks and houses obviously tailored for the high and middle income earners who can afford mortgages and those in the diaspora.  We see success stories for example in South Africa where housing has been prioritized in the country’s national shelter strategy with focus on low-income households. This led to the construction of 1.5 million units between 1994 and 2003. Countries like Chile and Cost Rica have also made significant strides in averting slum growth through low cost housing support.

Paving the way forward, it is imperative for government to make low cost housing a priority and demonstrate such commitment with the necessary policy instruments  and budget allocations to boost the housing sector but with focus being on low cost basic housing. While such allocations may be used for actual brick and mortar construction, the more viable option would be to complement housing funds in financial institutions. Such funds channeled through credible financial institutions would go a long way to subsidize mortgage financing. This translates into reduced interest rates. Mortgage financing in Uganda still attracts high rates and as such, many are not only unable to afford but are also skeptical about mortgages in general. It is however worth noting that one of the biggest influences on interest rates is the high cost of funds therefore while government will urge financial institutions to offer lower rates, they can only offer these funds within a margin that makes business sense. This in effect determines the interest rate offered to the public. In an increasing competitive global business environment, Strategic partnerships have increasingly become important in sourcing cheap financing which can be channeled through financial institutions at minimal margins so that mortgage consumers can enjoy low interest rates.

In conclusion, housing is a key economic indicator, housing greatly contributes to the standard of living and improves the general well being and livelihood of people. Housing is a basic need and therefore good housing is an enabler for a more productive society and should therefore be a key government priority but the emphasis should be low cost housing which can benefit the local wanainchi. In the long term, slam dwellings can become an issue of the past but this takes concerted effort from all stakeholders.

Edgar Rutaagi

The author is a Business writer and works with Standard Chartered Bank Uganda Ltd.

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