NSSF calls for caution of mortgage company

Richard Byarugaba, the managing director of NSSF, has called upon the government to establish a mortgage refinancing company in order to enable a large section of Ugandans acquire houses, which will in turn boost the real estate market.

Byarugaba noted that one of the things that constrain the housing market is the fact that there is no mature mortgage market in the country. The value of mortgages in this country is only Shs 28 trillion but 97 per cent of this is given to developers, locking out many Ugandans.

He explained that this means that there is a huge mismatch between the real estate developers and those who are buying, and that is why housing units that are created every year are only 800 yet the demand is about 180,000 units.

“We believe that the only way we can promote home ownership for even an ordinary Ugandan is by government creating a ‘Uganda Mortgage Refinance Company,’ which will have the capacity to lend money to commercial banks,” he said. He further explained that the commercial banks will now have the collateral of the mortgages, which they will give to the refinance company to work as security so that they can now issue out more bonds, raise more money and fuel the mortgage market.

“This will enable people not to rely on short-term funds from commercial banks. I believe that if that is done, then the issue of demand and supply in Uganda’s real estate market will be sorted out,” he said.

Byarugaba made the remarks during the recent launch of the fund’s first phase of its housing project, the Solana Lifestyle and Residences located in Lubowa along Entebbe road by President Yoweri Museveni last Thursday which comprises 306 bungalows with three and four bedrooms, seated on 60 acres and has cost the fund $73.3 million.

According to Byarugaba, the fund’s assets currently stand at Shs 17.2 trillion and real estate is only seven per cent of that investment portfolio.

“What this means to savers is that we have been locking up their capital in property and in our accounting records we have been running it as a work in progress. But now that it has been completed and launched, we are going to begin selling, make profits and give double-digit returns to our members,” Byarugaba promised.

The house units which are now ready for sale are going for between $150,000 (Shs 572 million) and $800,000 (Shs 3.1 billion). Byarugaba said the houses are going to be sold through a ‘rent to own’ model, which means a person will make a down payment of 10 per cent to 20 per cent on the property, enter the house and begin to pay rent.

“Once you have paid enough rent, the property becomes yours. This means there is no need to first get all the money to be able to buy the property. We are doing this because there are many people who do not qualify to get mortgages and, therefore, we are going to make this an electronic data marketplace for selling and buying property.” Byarugaba, however, acknowledged that the project is high-end for most Ugandans and, therefore, construction of more affordable houses is already going on in places such as Kyanja and Temangalo, where houses will be in the price range of $30,000 (Shs 115 million) and $40,000 (Shs 152 million).

In his remarks, President Museveni emphasized the need for Ugandans to embrace the culture of collective saving since it is one of the easiest ways of raising capital for investment in big ventures.

Museveni added, “The collections from the workers, government and employers are now totaling Shs 17 trillion. This shows that through collective efforts, big projects like these can be produced and it goes to show that indeed collective saving is very important for our people.”

Museveni praised the NSSF for investing in such a big project that will yield much profits in the near future for the fund’s savers.

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