Uganda faces housing hurdle in quest for middle-income status
KAMPALA, AUGUST 29 – Development of the housing sector should be seen as a key enabler of Uganda’s ambitions to achieve Middle Income Status argues Ms. Judy Rugasira, the Managing Director of international real estate consulting and advisory firm Knight Frank Uganda.
Speaking during a panel discussion on financing options for infrastructure development during the seventh edition of the Annual CEO Forum last week, Ms. Rugasira observed that much as it was always a demanding task for governments to fund infrastructure development alongside competing priorities, it is a duty they should not shun because of its transformational potential for the economy.
“If Uganda’s population continues to grow by over 3 percent annually over the coming years, by 2030, we will be faced with a housing crisis and a shortage of attendant social amenities such as schools. We therefore need affordable mortgage financing to establish quality but affordable housing units alongside our quest for middle income status,”
Rugasira argues that while there are many developers keen to build affordable housing to close the gap, they are held back by the unfavorable housing finance environment. Limited financing options and high interest rates make project development expensive which puts off potential investors in the sector.
Mortgage rates averaged 18 to 24 percent while prices rose 6.7 percent across the construction sector during the first half of 2016, Knight Frank says in its report for the first six months of the year.
Mathias Katamba, the Managing Director at Housing Finance Bank acknowledged the role of infrastructure in transforming the economy and the need to offer solutions now rather than later when the problem would have become intractable. But he blames the macro economy for the high interest rates that have restricted developers from filling the housing gap.
“The issue of interest rates is very tricky especially in instances where government competes with the private
sector and individuals for commercial credit. If government is borrowing at 17 percent, it becomes hard for
individuals and the private sector to find credit at a rate lower that what the government is willing to pay for the money it borrows.
Responding to the issues raised, Ugandan Prime minister Dr. Ruhakana Rugunda said the government was trying to improve the business environment by directing its energies at fast-tracking business reforms, fighting graft and improving public infrastructure.