News and Views
Hon. Amongi Betty Ongom (MP), Minister of Lands on policies, legal frame work…
The Minister gave an overview of the housing sector in Uganda. She appreciated the fact that this year’s convention attracted a number of development companies from Uganda including Jakana heights, Roofings Ltd Uganda, Comfort Homes, KPG Property management, Fakhruddin, Southgate Properties, Ssanga Courts, SMW Construction, Buganda Land Board, Universal M. Enterprises and Eric and Winston’s Estates. These companies have displayed a number of products in affordable to high-end developments in Uganda with many positive enterprises in the housing sector.
The Minister’s role, she said is to ensure policies, legal frame work and regulations that support the housing and real estate sector.
The Minister highlighted that in the last few years, Uganda’s economy had improved and is continuously improving. Experts believed that the country’s economy has great potential as it has several major resources like mineral deposits, lots of natural resources, fertile land and regular rainfall. A number of natural resources and manmade attractions make Uganda the greenest and most scenic of all the African countries; the country has lots of friendly people too. There are lots of quality medical facilities, first class hotels and restaurants, resorts and beaches and entertainment facilities can be found here. With these, the country will experience rapid economic growth and development. Uganda is the most entrepreneurial country in the world according to the Global Entrepreneurship Monitor, she added.
She assured delegates that in Uganda, Land of any tenure system offers a secure investment option. As it exists as a physical product, unlike some stocks and shares, a chunk or a plot of land can never be completely useless. Land offers an investment option with a low rate of costs, along with greater options over real estate and off-plan investing, providing a safe and sound investment, regardless of any changes to your financial state.
Investing in Uganda’s real estate industry needs a determined mind, capital as well as a visionary planner. To invest in property in Uganda, you may decide to buy a house, an apartment, a commercial building, warehouses as well as land for any purpose.
She outlined some Real Estates Business Opportunities which included 6 major niches within the Real Estates Business, we can have classified them as follows:
- Niche #1: Real Estate Brokerage – A fee charged by the mediator who facilitates a real estate transaction between the two parties
- Niche #2: Land Real Estate Development– You buy land and improve it by adding services and utilities including Roads, Electricity, and Water. You then divide up the land into smaller planned plots and sell them out for a profit.
- Niche #3: Condominium Uganda Real Estates Development– You construct a Building, divide it into different units, then you sell out the units.
- Niche #4: Commercial Real Estate Development– You construct a building and Let out each of the units at a monthly fee.
- Niche #5: Real Estate Management– You Manage a property owned by someone else.
- Niche #6: Uganda Real Estates Appraisal– You offer Professional Real Estate valuation services
The Minister also highlighted Land Ownership and Legal framework for investing in Real.
Types of Land Ownership
- Customary Land: Under this tenure, land is communally owned by a particular group of people in a particular area. Its utilization is usually controlled by elders, clan heads or a group in its own well-defined administrative structures.
In the Uganda Real Estate industry, this land tenure is usually in the North, Eastern, North east, North West and some parts of Western Uganda. Over 70% of land in Uganda is held on customary tenure system.
In such cases, people own their land, have their rights to it, but don’t have land titles. Some tenants on such land allocate specific areas to themselves with known and defined boundaries usually marked by ridges, trenches, and trees. However, one can buy, survey and title it as a freehold.
- Mailo Land: Land held under mailo tenure system is mainly in Buganda (Central region) and some parts of Western Uganda.
The system confers freehold granted by the colonial government in exchange for political co-operation under the 1900 Buganda Agreement and other related agreements with other kingdoms.
Essentially feudal in character, the mailo tenure system recognizes occupancy by tenants, a.k.a bibanja holders, whose relationship with their landlords is governed and guided by the provisions of the 1998 Land Act.
Mailo land, like freehold is registered under the Registration of Titles Act. All transactions must therefore be entered in a register guaranteed by the state.
Under this tenure, the holder of a mailo land title has absolute ownership of that land. One only loses such ownership when such land is needed for national interests but still compensations have to be done for relocation.
- Freehold Land: It’s a system of owning land in perpetuity and was set up by an agreement between the Kingdoms and the British Government. Grants of land in freehold were made by the Crown and later by the Uganda Land Commission.
The grantee of land in freehold was and is entitled to a certificate of title. Most of this land was issued to church missionaries and academic Institutions and a few individuals.
Freehold is the premier mode of private land ownership under English law. The Land Act recognizes it as one of the four regimes through which access to land rights may be obtained.
Its incidents are defined to include registration of title in perpetuity and conferment of full powers of ownership that is the power of use and disposition.
Real Estate Transactions involving freehold land are governed by the Registration of Titles Act. Little land is held under freehold tenure in Uganda.
- Leasehold Land: This is a system of owning land for a particular period of time. In Uganda you can get a lease from an individual, local authority or government for a period usually 49 or 99 years with agreed terms and conditions.
The leasehold Real Estate transactions, being essentially contractual allow parties to define the terms and conditions of access in such a manner that suits their reciprocal land use needs.
A grant of land would be made by the owner of freehold, customary or Mailo or by the Crown or Uganda Land Commission to another person for an agreed period of time. The grantee of a lease for an agreed time is entitled to a certificate of title issued by government.
- Public Land: Under this type of land tenure, the government owns land and has the right to lease it to any company or individual on specific terms and covenants.
The underlying principle is that Land in Uganda belongs to Ugandan citizens.
Therefore, if you are not a Ugandan citizen, you can only acquire Leasehold interest in Uganda Land.
On Land Real Estate Owners and Tenants, Hon Amongi cautioned delegates that before they purchased Land, they needed to find out the occupancy status of the tenants on that land. This is a critical due diligence step in their land real estate transaction because it contributes to the valuation of the land one intended to buy.
The obvious buying trend is that a plot of land with many tenants should cost less than a similar land with fewer tenants. The status of occupancy becomes of great importance when one wants to utilize the plot of land and yet one has to compensate the tenants first as provided in the law. Land which is occupied by many tenants protected by law is likely to cost more in terms of compensation to the tenants than a similar plot of land with unprotected tenants. A tenant by occupancy means a lawful or bonafide occupant according to the land act.
The Minister clarified who is a Bonafide Occupant in Uganda Real Estate Transactions, and further added that a bonafide occupant is a person:
- Who occupied land before the 1995 Land Act
- Has occupied and utilized land un-challenged by the registered owner for 12 years prior to the 1995 Constitution
- Has before 1995 been settled on the Land by the Uganda Government.
- Who is a lawful Occupant in Uganda Real Estate Transactions?
- A person who entered land with consent of the owner
- A purchaser of land from the owner
- A customary tenant who was not compensated at the time of leasing out the land.
- A person occupying land by virtue of the Toro and Ankole landlord and tenant law, and Busuulu and Envujjo Buganda Laws.
The Minister explained that, if one occupied land on the basis of a license by the owner, one is not a lawful or bonafide occupant. She Further added, if one acquires interest from a bonafide occupant, one become a bonafide occupant.
Hon Betty was happy to enlighten more on other legal framework governing Real Estate Developments:
- The Condominium Law
Under the Condominium Property Act of 2012, a real estate development company can build apartments and sell them as is and give the buyer a title deed for his/her property the same way one would sale a stand-alone house on a plot of land.
Maintenance costs (incorporating rates, facilities. maintenance, security, landscaping etc.) represent a significant tranche of the gross income in the management of apartment blocks. The Condominium Act provides for tenants of similar schemes to form Housing Associations for the management of these schemes. However, this is yet to be implemented effectively.
- Landlord and tenant Bill:
The bill, intended to regulate the relationship between landlords and tenants, is before Parliament for amendment.
- Income Tax Act 2018:
Interest on a mortgage for the construction or purchase of rental properties will now be an allowable deduction for rental income earned by an individual. Given that interest on mortgages was already an allowable expense for companies, this amendment is aimed at bringing consistency within the tax law as well as incentivize individuals to promote the mortgage market.
- Property Tax
It is a tax on all immovable property or buildings, commercially managed like schools, rented houses, rented shops, factories, Hotels, Private and Public Universities and any part of which is used for the purpose of business even if it is owner occupied.
According to the Local Government (Rating) Act 2005 as amended, the Local Government (Rating) regulation 2006 and KCCA Act 2010, every property owner is required to pay 6 % of the money they collect from commercial buildings after deducting allowable expenses such as water, electricity and wages.
The Minister further advised on opportunities in the residential sector.
According to the Uganda National Housing Policy and UBOS, there are 7.3 million households in the country living in 6.2m housing units with an average household size of 4.7 persons. The estimated annual need for new housing is 200,000 units. Of these 135,000 and 65,000 units are in rural and urban areas respectively.
In Uganda, private developers primarily target the high end housing segment since it fetches a premium over the mid income housing. This has led to an oversupply in the high income segment particularly in Nakasero, Kololo, Naguru and Bugolobi.
On the other hand, housing for the mid income segment is insufficient compared to the upsurge in demand.
To date, there are very few affordable housing projects that have been constructed on large scale, specifically targeting middle and lower middle income earners, i.e. those earning between UGX 0.5 million to UGX 1.5 million monthly.
On the case for Affordable Housing she added that according to the Uganda National Housing Policy, affordable housing is defined as that housing for which the associated financial costs are at a level that does not threaten other basic needs and represents a reasonable proportion of a households’ overall income.
According to a November 2017 report released by Center for Affordable Housing Finance in Africa (CAHF), property developers in Uganda were only able to reduce the annual housing requirement by about 1,000 units, in the period 2014 to 2016. In 2017, the forecasts suggested a grim picture of only 770 units to be delivered, maintaining the annual housing requirement at above 200,000, of which 135,000 are in rural areas and 65,000 in urban areas.
According to Knight Frank research, 60% of the above housing deficit is for low income earners, 37% for middle-income and only 3% for high end market.
Figure 1: Output vs Annual housing requirement in Kampala
Hence based on the above rate, it is certain that the country’s annual housing requirement will continue to prevail and yet the population is growing at an annual rate of 3.3 %.
On Market Trends and Relative Prices Hon Amongi stated that Knight Frank has recorded a 9% increase in demand for residential property for rent in the secondary residential suburbs of greater Kampala particularly Kira, Najjera, Kyanja, Namugongo, Naalya and Seeta during the first six months of 2018. This is on the back of an increase in stock of newly constructed residential properties, (apartment blocks in particular) in the middle income segment, ranging between UGX 100 million – UGX 200 million and UGX 400,000 –UGX 800,000 per month for selling and renting respectively.
It is also interesting to note that approximately 80% of the new stock of apartment blocks available on the market in Naalya, Kira, Najjera, Namugongo and Kyanja were sold during the first half of 2018.
She added that, these secondary suburbs were becoming increasingly popular for middle income home owners. Land tenure in these suburbs also tends to be “Private Mailo” which is considered an advantage for many home buyers who believe mailo tenure is in perpetuity, and is generally considered a “safer” tenure to have, as opposed to a leasehold title. Apartments were attracting higher demand than standalone houses as they were perceived to be more secure, and relatively cheaper as a result of shared costs for common areas and facilities like garbage collection, common area lighting and security. Primary research reveals the following market prices for affordable income housing in the greater Kampala suburbs of Gayaza, Najjera, Kira, Naalya, Namugongo and Mukono municipality.
Further the Minister gave an idea of prices of affordable housing properties in secondary residential suburbs around Kampala as follows:
- 1 bed apartment (40 m2) = UGX 450,000
- 2 bed apartment (65 m2) = UGX 650,000
- 3 bed apartment (80 m2) = UGX 800,000
- 2-3 Bed Houses (0.2-0.5-acre plot) = 1 -3 Million
- 1 bed apartment (40 m2) = UGX 70,000,000
- 2 bed apartment (65 m2) = UGX 150,000,000
- 3 bed apartment (80 m2) = UGX 180,000,000
- 2-3 Bed Houses (0.2-0.5-acre plot) =350 Million – 500 Million
Finally, Hon. Amongi gave an overview on the political architecture of Uganda based on Multi-party democracy with election conducted every after 5 years. H.E President Y.K Museveni was elected in 2016 with a 62% win. One of the candidate challenged the presidential election in court but it was dismissed. Recently, Ugandan conducted local council elections successfully, after the debate on removal of age limit from the constitution, and the NRM party led by H.E Y. K Museveni, the President won over 80% of the local government elections nationally.
Government was formed and is running smoothly despite occasional protests arising out of some political events including the recent by-elections. IPOD, the framework for political engagement for political parties exist for discussing and resolving major political disagreements on strategic policy issues among political parties represented in parliament.
She said that, at international level, Freedom-house, which is a global democracy research agency has just release the 2018 Annual Freedom World report 2018; in their report, this is how they assessed Uganda:
“Uganda: Uganda’s status improved from Not Free to Partly Free due to the resilience of the media sector and the willingness of journalists, bloggers, and citizens to voice their opinions……”
In her report, she added, Uganda is rated as one of the countries that has respected democratic values and guaranteed free and fair elections, the rights of women and vulnerable groups, freedom of the press, and the rule of law. The report concludes that 45% of the countries in the world is free, 30% are partly free (Uganda assessed as falling in this category) and 25% not free.
Although she disagreed with some of the analysis, this shows that Uganda’s political environment is conducive for expression of political issues, investments and increased economic growth. Concluded that Uganda continues with growth in tourism, infrastructure Development, the workers, and the business community doing business as usual.
Finally she encouraged delegates to visit Uganda Investment Authority website (www.ugandainvest.go.ug) and Uganda Registration Services Bureau (https://ursb.go.ug) for various information.