Housing Finance in Uganda
Overview
This profile is also available in French here.
To download a PDF version of the full 2023 Uganda country profile, click here
A landlocked country in the middle of East Africa, Uganda has witnessed an increase in rural-urban migration with the current urban population growth rate standing at 5.3% a year. The economy shows promising signs of recovery in the aftermath of COVID-19, with GDP growth of 4.6% in 2021/22 financial year. However inflation has risen rapidly, to 7.9% in July 2022, triggering an increase in interest rates: commercial banks announced interest rate changes to an average of 21% for August 2022. The developments in the credit market will certainly affect access to credit for the real estate sector to both supply-side actors such as property developers, and demand-side actors, particularly prospective homeowners.
At the same time, Uganda is experiencing changing weather patterns, decreased water levels, floods and landslides and droughts. Rapid population growth has damaged the environment, particularly as people clear forest cover for settlement. Furthermore, Uganda’s economy is still largely reliant on agriculture, making the country highly vulnerable to the effects of climate change and households vulnerable to food insecurity.
While Uganda’s unemployment rate is one of the lowest in the region at 2.9%, affordability remains a key challenge. Poverty levels remain high at 30% putting a new two-bedroom house priced at Ush205 million (US$54 719) out of reach of most low income Ugandans.
With respect to housing supply, Uganda’s high population growth rate at 3% coupled with a high urbanisation rate translates into a widening gap between the demand and supply of decent housing units. The current housing deficit is estimated at 2.4 million housing units with the bulk of these falling in the affordable housing segment. On the supply side are private developers delivering housing units of approximately 1 000 units a year. These complement individual households developing their own residential units for owner occupation. Given the housing gap, nearly half (48.3%) of the country’s urban population live in informal settlements.
Yet Uganda’s growing population also presents a unique opportunity for investment in the residential housing marketplace. The current influx of housing units is largely in the middle to high-end space, targeting largely the corporate salaried income earner with access to mortgage facilities from the banking industry. However, the bulk of the 2.4 million housing units needed are in the affordable housing segment with most prospective homeowners being in the low income segment of the population. Additionally, the newly implemented regulations on using retirement benefits to secure a residential mortgage offers an excellent opportunity for both lenders and housing developers to increase the scope of their product offering to this emerging niche.
Finally, Uganda has many renewable energy resources that could be used for energy production, including hydropower, biomass, solar energy, geothermal energy, peat, and wind. Many of these have not yet been fully explored. The Ugandan government is developing projects with international development organisations to make better use of these renewable energy sources and such projects could present many opportunities.
Find out more information on the housing finance sector of Uganda, including key stakeholders, important policies and housing affordability:
- Overview
- Access to Finance
- Affordability
- Housing Supply
- Property Markets
- Policy and Legislation
- Opportunities
- Availability of Data on Housing Finance
- Green Applications for Affordable Housing
- Websites
Each year, CAHF publishes its Housing Finance in Africa Yearbook. The profile above is from the 2023 edition, which has up-to-date profiles for 55 African countries and territories.
Download yearbookUganda
Overview
As a landlocked country in the middle of East Africa, Uganda is faced with excellent connectivity opportunities and challenging dependencies in almost equal measure. The country offers a gateway through which imports from Mombasa are routed to neighbouring countries including Rwanda, Burundi, South Sudan, and the Democratic Republic of Congo (DRC). To do this, Uganda heavily relies on Mombasa’s port in Kenya as a trade route to support the rising needs of a population of 43.7 million[1] people growing at a rate of 3.0% a year.[2] Most Ugandans are dependent on the agricultural sector which contributes approximately 22% of the Gross Domestic Product (GDP).[3]
The past decade has witnessed an increase in rural-urban migration with the current urban population growth rate standing at 5.3% a year.[4] Urban population growth has led to initiatives taken by the government of Uganda to transform the peasant economy to a middle income country through the focussed implementation of Vision 2040.[5] In pursuit of this ideal, the authorities established a number of industrial zones in several peri-urban areas such as Kampala, Mukono, Luwero, and Masaka in the central region, Jinja, Mbale, and Tororo in the eastern region, and Gulu in the northern region. This has been accompanied by tax incentives to encourage the establishment of industries in designated areas. Furthermore, to stimulate investment, the government provides free land on serviced plots in designated industrial zones.[6] These initiatives have culminated in the rise in informal settlements around industrial zones as thousands of industrial workers seek accommodation.
The Ugandan economy shows promising signs of recovery in the aftermath of COVID-19. Gross Domestic Product was 4.6% in the 2021/22 financial year (FY), up from 3.4% in the previous year. [7] The industrial sector performed particularly well and contributed 26.8% to the country’s GDP.[8] Economic growth has largely been supported by an expansionary monetary policy that increased access to credit through the flooring of the benchmark Central Bank Rate (CBR) to an all-time low of 6.5%[9] for much of the 2021/2022 financial year. However, recent developments in international markets, largely stemming from the Russia-Ukraine conflict, have caused the price of oil and other commodities to surge. These events have trickled into the Ugandan economy and significantly increased the price of goods and services. The annual headline inflation rate surged to 7.9% in July 2022 from 2.7% in January 2022.[10] To curb the rise in inflation, the Bank of Uganda responded by raising the Central Bank Rate (CBR). The first increase came in April 2022, when the CBR rose to 7.5%, up from 6.5% the previous month, followed by another 1 percentage point increase in July 2022, to 8.5%, and then another increase to 9% in August 2022.[11] This contractionary monetary policy has translated into a rise in the cost of borrowing. Commercial banks announced interest rate changes to an average of 21% for August 2022. The developments in the credit market will certainly affect access to credit for the real estate sector to both supply-side actors such as property developers, and demand-side actors, particularly prospective homeowners.
More specifically, inflation continues to rise rapidly across the basket of consumer goods and services. The rise in global commodity prices, partly due to COVID-19-induced supply chain disruptions, is being heightened by the Russia-Ukraine conflict. Higher business costs have already spread into consumer prices and affected the construction sector. Inflation as measured by the construction sector index, covering material prices, wage rates, and equipment hire rates, increased to 3.0% in March 2022 from 2.3% in February 2022[12]. The inflation rate is expected to peak in the first quarter of 2023 and revert to the 5% medium-term target in the middle of 2024[13]. The inflation outlook is uncertain and dependent on the evolution of the Russia-Ukraine war and possible measures to contain the conflict.
Although the economy has registered growth of 4.6% in FY2021/22, the worsening global growth and inflationary environment are likely to undermine domestic economic prospects. These developments will have a profound impact on the supply side of housing units for a country that is already struggling with a deficit estimated at 2.4 million housing units and a rapidly rising population.
Uganda is experiencing changing weather patterns, decreased water levels, floods and landslides and droughts. Rapid population growth has damaged the environment, particularly as people clear forest cover for settlement. Landslides in the Elgon sub-region have left thousands of families displaced and homeless over the last decade.[14] In August 2022 floods, after heavy rainfall, left 400 000 people without access to clean water, and destroyed more than 2 000ha of crops in the Eastern region. [15] Earlier attempts to resettle the households from the Elgon region to the safer Kiryandongo area in the Masindi district were hampered by inadequate government funding. Only 289 houses of the expected 600 houses had been constructed by the end of April 2022. [16] Most of these houses lacked sanitation facilities. The country’s Ministry for Disaster Preparedness is largely reactive and usually provides basic survival kits to the affected families in disaster areas. Furthermore, Uganda’s economy is still largely reliant on agriculture, making the country highly vulnerable to the effects of climate change and households vulnerable to food insecurity
[1] Uganda Bureau of Statistics. https://www.ubos.org/uganda-profile/ (Accessed August 2021).
[2] Word Bank (2021). https://data.worldbank.org/indicator/SP.POP.GROW?locations=UG (Accessed 15 September 2021).
[3] Uganda Bureau of Statistics (2021). Press Release. Quarterly Gross Domestic Product, 2nd Quarter 2020/21. https://www.ubos.org/wp-content/uploads/publications/03_2021QGDP_Press_release_Q2_2020-21.pdf (Accessed 12 September 2022) Pg.1
[4] World Bank Statistics https://data.worldbank.org/indicator/SP.URB.GROW?locations=UG (Accessed 12 September 2022) Pg.1
[5] National Planning Authority. Vision 2040. http://www.npa.go.ug/uganda-vision-2040/ (Accessed 16 August 2022) Pg.1
[6] Uganda Investment Authority. Industrial and Business Parks. https://www.ugandainvest.go.ug/parks/ (Accessed 16 August 2022).
[7] Uganda Bureau of Statistics. https://www.ubos.org/annual-gdp-fy-2020-21/ (Accessed 20 August 2021) Pg. 1
[8] Uganda Bureau of Statistics. https://www.ubos.org/uganda-profile/ (Accessed 20 August 2021) Pg.1
[9] Bank of Uganda (2021). Monetary Policy Statement for June 2021. https://www.bou.or.ug/bou/bouwebsite/bouwebsitecontent/MonetaryPolicy/Monetary_Policy_Statements/June-2021/Monetary-Policy-Statement-June-2021.pdf (Accessed 16 August 2022) Pg.1
[10] Bank of Uganda (2022). Monetary Policy Statement July 2022. https://www.bou.or.ug/bou/bouwebsite/bouwebsitecontent/MonetaryPolicy/Monetary_Policy_Statements/2022/Monetary-Policy-Statement-August-2022.PDF (Accessed 12 September 2022) Pg.1
[11] Bank of Uganda. (2022). Inflation rates – Central Banking Rate. https://www.bou.or.ug/bou/bouwebsite/Statistics/Inflation.html (Accessed 7 September 2022).
[12] Uganda Bureau of Statistics (2022). https://www.ubos.org/wp-content/uploads/publications/04_2022Construction_Sector_Indices_March_2022.pdf (Accessed 18 August 2022). Pg.3
[13] Central Banking (2022). Bank of Uganda raises rates 100bp at unscheduled meeting. 07 Jul 2022. https://www.centralbanking.com/central-banks/monetary-policy/monetary-policy-decisions/7950516/bank-of-uganda-hikes-100bp-at-unscheduled-meeting#:~:text=The%20Bank%20of%20Uganda%20maintains,will%20average%207.4%25%20this%20year. (Accessed September 2022).
[14] Kakumba, MR. (2022). Climate change worsens life in Uganda; citizens want collective action to mitigate it. 12 September 2022. Afrobarometer Dispatch No. 547. https://www.afrobarometer.org/wp-content/uploads/2022/09/AD547-Ugandans-want-action-on-climate-change-Afrobarometer-dispatch_4sept22.pdf. Pg 1. (Accessed on 26 September 2022).
[15] ReliefWeb (2022). Floods in Eastern Uganda kill at least 30 people and leave 400,000 without access to clean water. 4 August 2022. https://reliefweb.int/report/uganda/floods-eastern-uganda-kill-least-30-people-and-leave-400000-without-access-clean-water (Accessed 12 September 2022).
[16] NTV Uganda (2022). How displaced Bududa residents are coping in Kiryandongo. 11 April 2022.
https://www.youtube.com/watch?v=RDosskd8eUo (Accessed 14 September 2022).
Access to Finance
The recovery of economic activity over the FY 2021/2022 had a positive impact on access to finance as financial institutions renewed their appetite for heightened visibility by setting up new branch networks. The total number of bank branches increased by 48 to 614 in 2021 compared to 2020, along with an increase of 49 automated teller machines (ATMs) operated by commercial banks to 886 in 2021.[1]
The cumulative number of Credit Reference Bureau (CRB) financial cards issued to borrowers increased by 9.6% to 2 157 828 in December 2021 compared to December 2020.[2] At the same time, the number of branches of Institutions with access to the CRB system increased from 598 to 603. Borrowers must have a financial card, which functions as a credit score card, to apply for credit.[3] The rise in the number of cards indicates an increase in the demand for credit facilities. This is supported by a 20% increase in credit enquiries to CRBs, which totalled 975 238 in December 2021, up from 810 782 in December 2020.[4]
To improve gender equality in access to credit, several financial institutions have introduced programmes focusing on women financial empowerment. Housing Finance Bank , DFCU Bank and Centenary Bank[5] have all established differentiated savings and business accounts for women. The account-holders in these segments have an opportunity to network with other business owners and also access training opportunities from the respective banks on matters of financial management and business planning. There has however been limited traction on fostering access to housing finance for women.
The demand for credit was more pronounced in the commercial banking space and banks registered strong growth in credit during 2021 at a rate of 8.8%, to Ush 17.7 trillion (US$ 4.72 billion). Loans by microfinance deposit-taking institutions (MDIS) increased by 2.3% while those by credit institutions contracted by 58.4%, reflecting the upgrade of Post Bank from a credit institution to a commercial bank in December 2021.[6] This upgrade will enable PostBank to access a larger pool of funding options by taking on collection roles of government agencies, including the Uganda Revenue Authority and Pension Sector contributions. These funds can, in turn, provide funding for long-term assets including mortgages. Loans to all sectors increased, except to the business and social services sectors where credit contracted by 6.2% and 11.7% respectively[7].
Overall, credit risk remained elevated over the last financial year, but more adverse effects were moderated by the Bank of Uganda’s credit relief measures. The share of Non-Performing Loans (NPLs) to total loans rose to 5.3% in June 2022 from 4.8% in June 2021[8]. More specifically, the NPL for building, construction and real estate segment portfolio rose to 9.7% in June 2022 from 6.5% in June 2021.[9]
Commercial banks’ interest rates increased, reflecting the residual impacts of the pandemic on business entities that were still under the support of the Credit Relief Measures (CRM) in the education and entertainment sectors.[10]
On the back of accommodative monetary policy, the growth of Private Sector Credit (PSC) persisted through much of 2021. The cost of borrowing across most segments of business and consumer credit continued to remain low, averaging 16.3% for commercial bank loans. Due to the favourable lending rates, the banking industry witnessed a slight increase in sector credit uptake during the one year period to May 2022.[11] Credit for residential mortgages grew by 11.0% between June 2021 and June 2022.[12]
While the demand and supply of credit increased over the past year (especially from October 2021), the value of loan approvals remain slightly above half of the value demanded by borrowers.[13] The value of loan applications, which is a proxy for demand for credit, rose to Ush5.1 trillion (US$1.36 billion) in the quarter to January 2022 from Ush4.9 trillion (US$1.30 billion) in the quarter to October 2021. The value of loan approvals, on the other hand, rose slightly, totalling Ush2.9 trillion (US$774.08) million in the quarter to January 2022 from Ush2.8 trillion (US$747.39 million) in the quarter to October 2021.[14] Despite this modest rise in demand and value of disbursements, the growth in shilling denominated loans fell to an average 10.4% from 12.0% for the quarter to February 2022. That credit growth has slowed despite demand for credit increasing indicates that banks are increasingly risk averse and are concentrating more on the recovery of NPLs.
The rise in inflation during the first half of 2022 has exacerbated the already fragile credit market. In addition to raising the central bank rate to contain inflation, Bank of Uganda in June 2022 increased the cash reserve requirement (CRR) from 8% to 10% of total deposits of commercial banks. This increase in the CRR enabled the regulator to mop up over Ushs600 billion[15] (US$ 160.15 million) of market liquidity which would otherwise be available to boost commercial bank lending for deserving sectors, including housing.
[1] Bank of Uganda (2021). Annual Supervision Report 2021.https://www.bou.or.ug/bou/bouwebsite/bouwebsitecontent/Supervision/Annual_Supervision_Report/asr/Annual-Supervision-Report-2021.pdf (Accessed 26 August 2022) Pg. 8.
[2] Bank of Uganda Annual Report (2021), https://www.bou.or.ug/bou/bouwebsite/bouwebsitecontent/publications/Annual_Reports/All/Annual-Report-2021-for-upload-on-website-1.pdf (Accessed 26 August 2022) Pg. 28.
[3] Bank of Uganda. https://www.bou.or.ug/bou/export/sites/default/.gallery/publiceducation/Brochures/Credit-Reference-Services-CRS-QA.pdf (Accessed 26 August 2022) Pg. 2.
[4] Bank of Uganda (2021). Annual Supervision Report 2021 (Accessed 26 August 2022) Pg.9
[5] Centenary Bank. https://www.centenarybank.co.ug/index.php/product/CenteSupaWoman-Account (Accessed 29 September 2022).
[6] Oketch, ML. (2022). Commercial bank profitability surpasses Shs1 trillion mark. 17 June 2022. Monitor Publications Ltd. https://www.monitor.co.ug/uganda/business/finance/commercial-bank-profitability-surpasses-shs1-trillion-mark-3851054 (Accessed 26 August 2022).
[7] Bank of Uganda Statistics https://www.bou.or.ug/bou/bouwebsite/Statistics/Statistics.html (Accessed 14 September 2022).
[8] Bank of Uganda (2021). Annual Supervision Report 2021. December 2021. https://www.bou.or.ug/bou/bouwebsite/bouwebsitecontent/Supervision/Annual_Supervision_Report/asr/Annual-Supervision-Report-2021.pdf (Accessed 26 August 2022) Pg.29
[9] Bank of Uganda (2021). State of the Economy Report. September 2021. https://www.bou.or.ug/bou/bouwebsite/bouwebsitecontent/publications/QuartelyStateofEconomy/publications/Quarterly-Economic-Reports/2021/Sep/SOE-Report-September-2021.pdf (Accessed 14 August 2022) Pg. 16
[10] Bank of Uganda. Statistics. https://www.bou.or.ug/bou/bouwebsite/Statistics/Statistics.html (Accessed 14 September 2022).
[11] Bank of Uganda. Interest Rates. July 2021 https://www.bou.or.ug/bou/bouwebsite/Statistics/Interest.html (Accessed 12 September 2022).
[12] Bank of Uganda. Statistics. https://www.bou.or.ug/bou/bouwebsite/Statistics/Statistics.html (Accessed September 2022).
[13] Bank of Uganda. (2022). State of the Economy Report – June 2022. https://www.bou.or.ug/bou/bouwebsite/bouwebsitecontent/publications/QuartelyStateofEconomy/publications/Quarterly-Economic-Reports/2022/Jun/SOE-report-June-2022-Final.pdf (Accessed 7 September 2022). Pg. 15.
[14] Bank of Uganda. (2022). State of the Economy Report – March 2022. https://www.bou.or.ug/bou/bouwebsite/bouwebsitecontent/publications/QuartelyStateofEconomy/publications/Quarterly-Economic-Reports/2022/Mar/SOE-report-March-2022-Final.pdf (Accessed 7 September 2022). Pg. 17.
[15] Bank of Uganda (2022). State of the Economy Report June 2022 https://www.bou.or.ug/bou/bouwebsite/bouwebsitecontent/publications/QuartelyStateofEconomy/publications/Quarterly-Economic-Reports/2022/Jun/SOE-report-June-2022-Final.pdf (Accessed 20 August 2022).
Affordability
While Uganda’s unemployment rate is one of the lowest in the region at 2.9%,[1] compared to Kenya at 5.7% and South Sudan at 13.9%, affordability remains a key challenge. Poverty levels remain high at 30%[2] putting a new two-bedroom house priced at Ush205 million (US$54 719)[3] out of reach of most low income Ugandans.
Earlier anticipation of a post-pandemic easing of the price of real estate on account of eased supply chain lines did not materialise as global inflation in commodity prices and building materials helped increase the price of land and houses in Uganda’s major urban areas. The year-on-year inflation rate for material inputs, equipment hire, and wages increased to 3% by March 2022, up from 2.3% in February 2022. Roofing sheet increased by 16.9% in March 2022, followed by other iron and steel by 11.7%, and cement by 5.3%.[4] These three items constitute the major manufactured items for most affordable housing units across the country. A combination of the surge in prices of building materials alongside the increase in borrowing interest rates continues to stifle the affordability of decent housing units for prospective homeowners.
The price of housing units has remained relatively stable despite the rise in prices of construction materials. The price of a newly constructed 46m2 one-bedroom house is approximately Ush120 million (US$32 031) while a 98m2 two-bedroom house goes for Ush185 million (US$49 381) and a 112m2 three-bedroom unit for Ush250 million (US$66 731).[5] These prices are likely to rise as inflation affects the new stock of housing units coming onto the market.
[1] World Bank (2021).https://data.worldbank.org/indicator/SL.UEM.TOTL.ZS?locations=UG (Accessed 28 September 2022).
[2] World Bank (2022). Uganda Poverty Assessment. 27 June 2022. https://openknowledge.worldbank.org/handle/10986/37752 (Accessed 28 September 2022) Pg. 1.
[3] Generated from average prices on developer websites.
[4] Uganda Bureau of Statistics. (2022). https://www.ubos.org/wp-content/uploads/publications/04_2022Construction_Sector_Indices_March_2022.pdf (Accessed 26 August 2022).
[5] Website sources of the main Property Developers in Uganda (Accessed 14 August 2022).
Housing Supply
Uganda’s high population growth rate at 3%[1] coupled with a high urbanisation rate of 5.2%[2] translates into a widening gap between the demand and supply of decent housing units. The current housing deficit is estimated at 2.4 million housing units[3] with the bulk of these falling in the affordable housing segment. This housing backlog is further estimated to be growing by 300 000 units a year, largely due to increased population expansion in urban areas.[4] Uganda has no deliberate government programme to support the delivery of affordable housing units and government supply of land for affordable housing has been insignificant. Its major impact had been on the free extension of electricity to the rural areas through the Rural Electrification Agency, which was suspended in 2020 due to lack of funding. Currently, the cost of a new connection ranges from USh720 883 (US$192.4) to Ush2 741 188 (US$731.7)[5] depending on the number of poles needed to connect the residential house. This remains out of reach for most homeowners.
On the supply side are private developers delivering housing units of approximately 1 000 units a year. These complement individual households developing their own residential units for owner occupation. Many individual developers also build for rental income. Most such developers usually build fewer than five units to earn passive rental income.
Given the housing gap, nearly half (48.3%) of the country’s urban population live in informal settlements.[6] These settlements have limited access to water and sanitation, posing significant challenges for urban planning. Traditional homes in Uganda are built with mud walls and thatched roofs, with urban housing using concrete or mud bricks and metal roofs.[7]
[1] World Bank (2021). Population growth (annual %) – Uganda. https://data.worldbank.org/indicator/SP.POP.GROW?locations=UG (Accessed 8 September 2022).
[2] World Bank (2021). Urban population growth (annual %) – Uganda. https://data.worldbank.org/indicator/SP.URB.GROW?locations=UG (Accessed 8 September 2022).
[3] Reall. Uganda – Market Shaping Indicators. https://www.reall.net/msi/uganda/ (Accessed 20 August 2021).
[4] Knight Frank (2022). Challenges and Opportunities in Uganda’s Affordable Housing. 06 April 2022. https://www.knightfrank.ug/blog/2022/04/06/challenges-and-opportunities-in-ugandas-affordable-housing
[5] UMEME. What you need to get connected. https://www.umeme.co.ug/what-you-need-to-get-connected (Accessed 28 September 2022).
[6] Reall. Uganda – Market Shaping Indicators. https://www.reall.net/msi/uganda/ (Accessed 20 August 2021).
[7] Rek, J.C, Alegana, V., and Arinaitwe, E. et al. (2018). Rapid improvements to rural Ugandan housing and their association with malaria from intense to reduced transmission: a cohort study, in The Lancet Planetary Health, Vol 2, Issue 2. February 2018, pgs. e83-e94. https://www.sciencedirect.com/science/article/pii/S254251961830010X. (Accessed on 26 September 2022) Pgs. 2. 9.
Property Markets
At the household level, the demand for residential real estate is still robust, particularly for housing units located in planned residential estates. Several property developers in the Greater Kampala Metropolitan Area (GKMA) covering the Kampala district and urban areas of Wakiso district have seen some of their on-sale properties bought in less than three months. Prices as measured by the Residential Property Price Index (RPPI) for GMKA fell by 5.8% over the quarter to March 2022 compared[1] to a 4.5% decline over the quarter to December 2021. This noted decrease in RPPI is mainly attributed to a 7.9% drop in Residential Property Inflation for Kampala in March 2022, compared to the earlier 17.4% increase over the quarter to December 2021.
Cumulatively, loans totalling Ush7.2 trillion (US$1.92 billion) representing approximately 40% of the banking industry’s gross loan portfolio have been restructured by financial institutions from April 2020 to March 2022.[2] With the reopening of economic activity after the lockdown, borrowers that benefited from the programme resumed repayment of their obligations and subsequently reduced the stock of loans under credit relief to Ush2.6 trillion (US$694.0 million) in March 2022, from Ush3.1 trillion (US$827.46 million) in December 2021 and a peak of Ush5.2 trillion (US$1.39 billion) in September 2020.[3] The reductions have also been strongly influenced by foreclosures, particularly where the borrowers have failed to meet their obligations for the sectors where the CRM program expired on 30 September 2021.
[1] Uganda Bureau of Statistics (2022). Press Release – Residential Property Price Index Third Quarter 2021/22. https://www.ubos.org/wp-content/uploads/publications/03_2022RPPI_MARCH_2022_PRESS_RELEASE.pdf (Accessed 26 September 2022).
[2] Bank of Uganda Statistics https://www.bou.or.ug/bou/bouwebsite/Statistics/Reports/PSIS.html (Accessed 14 September 2022).
[3] Bank of Uganda. Statistics. https://www.bou.or.ug/bou/bouwebsite/Statistics/Reports/PSIS.html (Accessed 14 September 2022).
Policy and Legislation
In November 2021, the Bank of Uganda revised the annual licence fees for all supervised financial institutions. The rationale was, in part, aimed at harmonising the license fees with other East African Community (EAC) member states and also increasing the funding line for the regulator. With the new licensing structure, commercial banks must pay the higher of 0.05% of their Gross Annual Revenue (GAR) or Ush50 million (US$13 346) while Credit Institutions must pay the higher of 0.05% of their GAR or Ush20 million (US$5 338), and Microfinance deposit-taking institutions (MDIS) must pay the higher of 0.05% of their GAR or Ush10 million (US$2 669).
The central bank is also in the final stages of drafting the MDIS (Registered Societies) Regulations, 2021, to guide regulatory oversight for Savings and Credit Cooperative Societies (SACCOs). Once finalized, these regulations will pave the way for the supervision of select SACCOs by the Bank of Uganda. Also, the Bank of Uganda is concluding the amendment of the Microfinance Deposit-taking Institutions Act, 2003. The proposed amendment will enable the institutions to provide Islamic banking, agent banking, and bancassurance services. The amendment will also allow for access to the credit bureaus. This will further increase access to finance for low-income earners seeking to enter micro-mortgage arrangements, by enabling the micro-lenders to establish the credit track-record of prospective borrowers and improve processing of loans, including those to the housing sector.
The Uganda Retirement Benefits Regulatory Authority as the regulator of the pension sector has issued new regulations to enable the assignment of pension contributions towards the acquisition of a residential property. The Assignment of Retirement Benefits of Mortgages and Loans Regulations, 2022, paves the way for members of Retirement Benefits Schemes to access mortgages or home loans to buy, build or renovate a residential property/ house by using 50% of their accumulated savings as security as opposed to using the ordinary residential property as security. This development is likely to spur increased access to decent housing, making homeownership a reality for many by allowing savers to leverage their accumulated savings to meet their housing needs before they reach retirement age.
The regulations further place conditions for assigning the retirement benefits to include a mandatory 10-year period of contributions and the lending institution to access the retirement benefits only as the last resort in the recovery process. Once harmonised, the development will enable up to 2.5 million[1] savers with pension schemes to use part of their pension contributions as collateral for residential house construction and development.
Another significant development is the amendment in the National Social Security Fund (NSSF) Act that allows for midterm access to pension contributions for members aged 45 or older who have saved for a decade, or people with disability aged 40 and above who have saved for a similar period. Given that more than 60% of retiring NSSF contributors deploy their pension funds for to buy or build residential houses,[2] the amendment in the act will promote further delivery of residential housing units.
Over the first three months of this provision coming into effect (March to May 2022), a total of 21 278 members representing 51.6% of the total savers eligible for the NSSF midterm benefits had applied for their 20% benefits. A total of Ush414.1 billion (US$110.53 million) has been paid out, the bulk of which finds its way to the real estate sector.
[1] International Labour Organization. Social Protection, Uganda. https://www.social-protection.org/gimi/gess/ShowCountryProfile.action?iso=UG (14 Accessed September 2022).
[2] National Social Security Fund (2018) Internal Survey 2018.
Opportunities
Uganda’s growing population presents a unique opportunity for investment in the residential housing marketplace. The current influx of housing units is largely in the middle to high-end space, targeting largely the corporate salaried income earner with access to mortgage facilities from the banking industry. However, the bulk of the highlighted two million housing units is in the affordable housing segment with most prospective homeowners being in the low income segment of the population.
Additionally, the newly implemented regulations on using retirement benefits to secure a residential mortgage offers an excellent opportunity for both lenders and housing developers to increase the scope of their product offering to this emerging niche.
Uganda has many renewable energy resources that could be used for energy production, including hydropower, biomass, solar energy, geothermal energy, peat, and wind. Many of these have not yet been fully explored.[1] The Ugandan government is developing projects with international development organisations to make better use of these renewable energy sources and such projects could present many opportunities.
[1] Business Scouts for Development (2022). Sector Brief Uganda: Renewable Energy. February 2022. https://www.giz.de/en/downloads/giz2022-en-sectorbrief-uganda-renewable-energy.pdf. (Accessed on 26 September 2022). Pg. 2.
Availability of Data on Housing Finance
Data on financing for residential mortgages is compiled monthly by the central bank and released in aggregate form for the entire industry. The Bank of Uganda website itself appears to be incompatible with some browsers and some pages prove inaccessible. However, specific information about the number of mortgages issued by financial institutions is not readily available as lenders are reticent about sharing such information.
Green Applications for Affordable Housing
A number of mortgage lenders are beginning to incorporate renewable energy solutions as complementary products to the basic mortgage for affordable housing. Housing Finance Bank, the largest mortgage bank in the country, now offers solar loans, side by side with the Incremental Loan facility tailored for the affordable housing segment. The amounts range from USh500 000 (US$133.5) to USh20 million (US$5 338.5) and can be used for home construction, including solar installation for domestic use.
The Uganda Green Growth Development Strategy builds on the Uganda Vision 2040 and the National Development Plan in support of a low-emissions economic growth pathway, incorporating resource use efficiency, climate resilience and disaster risk reduction.
Fuelwood and charcoal are primary sources of household energy across Uganda. The use of these are contributing to environmental problems including deforestation and the destruction of wetlands, and health problems due to indoor air pollution through cooking and heating. Approximately half of Ugandans have access to electricity and approximately 24% have access to electricity for more than four hours per day.[1]
[1] Business Scouts for Development (2022). Sector Brief Uganda: Renewable Energy. February 2022. https://www.giz.de/en/downloads/giz2022-en-sectorbrief-uganda-renewable-energy.pdf. (Accessed on 26 September 2022). Pg. 2.
Websites
Affordable housing https://affordablehousing.ug/
Bank of Uganda. httpps://www.bou.or.ug
National Planning Authority http://www.npa.go.ug
Uganda Bureau of Statistics https://www.ubos.org/
