Housing in Uganda: Growing Pains of a Boom Sector

Daudi and Rose have been saving to build a house for their young family or the last five years. However, because of many other commitments such as paying school fees, rent, water and electricity bills, the money never seems to reach the target. When the couple decided to go to real estate exhibition [Stanbic Bank-sponsored Auto Home Show 2009], they were exposed to available options of home ownership. They followed up with a real estate development company, which linked them to a bank for a mortgage to buy a house. Now, they have a home that they are paying for in instalments over several years. According to Daudi, instead of paying rent to a landlord, they are making monthly payments to eventually own the home they are living in.

Sam, on the other hand, built his house painstakingly over seven years. Firstly, by purchasing the land, then saving money to put up the foundation and slowly, brick by brick, working his way through the different stages until the roofing was done. He is now satisfied that he now owns a house that fits to his exact requirements and taste.

Musa lives in a slum that rapidly shrinking in the face of the developments that taking place around him. Many of his neighbours are selling off their land at a bargain to those who are putting up modern houses. Musa is one of those not moving despite being approached with attractive offers. He built his house from a labourer’s savings; and a source of pride to him.

Even in the traditional African setting, an aspect that is more visible in the rural areas, a man erects a hut or house in which his wife and family live in. As such, when a boy becomes of age, he is allocated a piece of land on which he builds a hut or house and establishes a farmland.

Owning a home or having a place where to live satisfies a basic human need for shelter. Perhaps, the often-referenced explanation is by Abraham Maslow’s theory of hierarchy of needs. In this, he identified shelter as one of the safety and security needs. Many people work hard to own homes. The urge to have a home is one of the ways in which these needs show themselves. Daudi, Rose, Sam and Musa are responding to this need in different ways in relation to circumstances and choices among the available options. Many people work hard throughout life and never get to own homes.

After transport and communication, housing and construction is the fastest growing sector of Uganda’s economy. Figures from the Ministry of Works and Transport indicate that the housing sector grew by 13% in 2007/2008 from 11.3% in 2006/2007. It should be noted that this encompasses real estate [“usually buildings and the ground they are built on”], and construction [“the trade of building structures”]. Here, the focus is on housing [“the structures in which people reside in”].

It is indeed empowering for people to have their own homes or to earn income from residential units. Having a house is one of the priorities when one starts to earn an income or gets a job. It is also commonplace to start by building a house in a place one considers home, usually a rural area, and then another in proximity to an urban centre. “A house in the village doesn’t make economic sense but it has one big social aspect”, says Norbert Katsirabo, a development economist. He explains that this revolves around earning respect from peers and gaining status in the community.

The most recent survey on housing by the Uganda Bureau of Statistics shows a huge demand for accommodation. There is a deficit of 550,000 units countrywide, of this 160,000 units is in the urban areas. With the rate of urbanisation and a population growth rate of over 3% per year, in 20 years, there will be a shortage of 8 million units. In the urban centres, it will be deficit of 2.5 million units representing 15.6%—of this, a shortage of one million units will be in Kampala.

This scenario presents an opportunity for real-estate developers. Thus, the emergence of such firms that are competing to meet the ever-rising demand—offering tailor-made choices for different categories; concepts like planned estates, satellite cities, apartments (serviced or not), low-cost housing are some of these. The latter has been mostly carried out by the National Housing and Construction Corporation—government’s entry in this sector is for strategic economic interests.

Recognising the need, the banks have also customised packages that will attract those aspiring to become home-owners. This includes mortgage financing, salary earners’ loans home improvement loans. However, the constant headache is high interest rates. Samuel Dawa, a lecturer at Makerere University Business School, says, “It is definitely viable to use all resources you can marshall than going for the mortgage where you will pay much more in the end”. However Katsirabo cautions that though this may be the best option, if a mortgage is used, it is advisable to retire it early to mitigate costs of high interest.

Whatever the method that one uses to own a house, the process is influenced by factors that may be out of one’s control. The sector is characterised by many problems such as lack of regulation, enforcement of standards, unqualified persons, among others. Also, there are concerns about the Mortgage Bill that has been passed, the highly controversial Land Bill and issues like the global economic downturn that could impact Uganda in ways that are not yet envisioned.