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200 properties auctioned monthly

A mini-survey has revealed a rise in advertisements of real estate worth billions of shillings due for distress sales.

At least 50 properties are going under the hammer each week – an indicator that the economy remains stuck in the doldrums despite the best efforts of the mandarins managing Uganda’s financial affairs, writes ALON MWESIGWA. 

N-Bridge hotel is an imposing facility perched atop Namirembe hill in the capital, Kampala.

The hotel sitting on 0.136 acres, with at least 24 self-contained bedrooms already functional is on sale. Not by the owners, Frontier Logistics International Ltd, but by an unnamed financial institution represented by Quickway Auctioneers and Court Bailiffs.

“We have been duly instructed by our client, a financial institution in Kampala which is a registered mortgagee, to advertise, and sell by public auction/private treaty…,” reads a note on the property.

Frontier Logistics has joined a long and growing list of property owner facing foreclosure (the legal process by which a lender tries to recover a loan from a borrower who has stopped making payments by forcing the sale of the asset used as collateral for the loan) by a financial institution.

Hundreds of persons and companies are losing properties with economy watchers struggling to explain what is going on. A mini-survey by The Observer shows that at least 50 properties are advertised in a week, totalling up to 200 every 30 days.

One other such property is an imposing apartment block located on plot 4910 in Kisugu, Kyadondo, owned by a former top official in the auditor general’s office. Another is a commercial building located on Plot 35, block 438 in Nkumba, Wakiso district, belonging to a former official at Bank of Uganda.

Then there is a very large students’ hostel in Wandegeya owned by John Buyinza. Sebbagala and Sons Electronic Centre Ltd property on plot 29 Mackenzie Close in exclusive Kololo is being auctioned.

Undeveloped but prime lots of land are also being taken over by banks. Other properties up for sale belong to businessman Habib Kagimu, whose interests range from oil and gas to real estate.

Kagimu was once an indispensable intermediary between Uganda and Libya when deposed leader Muammar Gadaffi was still alive.

His properties, including a hostel and bungalow in Bugolobi, a residential house along Wampewo avenue in upscale Kololo, and undeveloped land on Sir Apollo Kaggwa road were last week advertised by court bailiffs and auctioneers. 

Dr Adam Mugume, the executive director of research at Bank of Uganda, noted that the real estate sector has been thriving in some sort of a growth bubble.

He told The Observer how property prices grew by leaps and bounds up to around 2010. The promise of the country’s oil sector was still alive and demand for prime buildings was thought to continue pushing up.

“There are those people who borrowed assuming property prices would continue rising and, therefore, sell their properties [at profit]. Those are the people we are talking about whose properties are being sold,” said Mugume.

As at the end of 2016, non-performing loans – the money where the borrowers have failed to continuously pay back – accounted for 10.6 per cent of the total loan book.

The figure is now reflected at 5.8 per cent in bank of Uganda’s records this year but still more people are unable to meet their financial obligations. Almost half of the non-performing loans were attributed to Crane Bank, which was sold off in January 2017.

NO BUYERS

But even after they have taken on the properties, according to court bailiffs and several commercial banks’ officials we spoke to, there are no buyers.

Naboth Apamba, an official at Excel court bailiffs and auctioneers, told The Observer: “The market has not been well. People are not buying. People don’t have the money.” “When you advertise the property, people come, make some inquiries and when you tell them the price, they don’t come back.”

He said if they had their way, they would cut the price of properties but by law, a foreclosed property is supposed to be sold at the market value.

Another court bailiff said: “We have so many properties we haven’t sold that we may stop to take them on.”

Vincent Agaba, former president of the Association of the Real Estate Agents and managing director of Avarts Housing Limited, said what is happening is a reflection of what is going on elsewhere in the economy.

He said interest rates are high and people’s purchasing power is low – this ultimately is reflected in the many properties on the market that no one is willing to buy.

“It is both because the slump experienced two to three years ago has really not gone away and also a reflection of what is happening in the economy.”

Agaba said the real estate sector does not exist in isolation. When other sectors of the economy are doing well, it will also do well. Stephen Kaboyo, an analyst and director at Alpha Capital, echoes similar views noting that people running the economy need to realise that something is not right somewhere.

“I was reading one of the papers and found a property of someone working in one of the banks being taken over. That should worry us,” Kaboyo said.

At the central bank, officials remain hopeful that the economy is recovering. Yesterday, Bank of Uganda governor Emmanuel Tumusiime-Mutebile announced a 0.5 per cent cut on the benchmark rate to nine per cent. The rate called the central bank rate should ideally signal the direction of interest rates in the economy.

The cut is an indicator that the economy is looking up and commercial banks are supposed to be inspired to lend more at lower rates. Uganda’s economy marginally grew by only 2.5 per cent in 2016, according to the cental bank’s index that tracks economic activity in the country.

In 2017, it was expected to expand by 5% and this should reflect in the housing sector. The central bank anticipates that government investment in public projects like roads and dams will eventually boost the economy. But Mugume warns that this will take a while to be felt.

While Agaba urges the public to be patient before any impact from the massive public investment in infrastructure is felt, he also asks how much of the money actually spent stays in the country.

amwesigwa@observer.ug

Comments

0 #1 Kent Mawa 2018-02-21 13:04
Can somebody tell me which part of Kampala is in the above pictuce .
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+1 #2 nicholas 2018-02-21 15:13
Quoting Kent Mawa:
Can somebody tell me which part of Kampala is in the above pictuce .


the supposed development at Uganda Golf club roundabout, with fairway hotel on one side.

I wonder does it really ease traffic.
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+1 #3 Kamya 2018-02-21 15:40
Quoting Kent Mawa:
Can somebody tell me which part of Kampala is in the above pictuce .

Fairway hotel
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+1 #4 Ugthinker 2018-02-21 15:47
Quoting Kent Mawa:
Can somebody tell me which part of Kampala is in the above pictuce .


Yusuf Lule Road, if it hasn’t been changed of recent by the invaders!
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0 #5 WADADA rogers 2018-02-21 15:52
Kent Mawa, ignorance is not a disease, this picture is taken above the junction near fair way hotel, on the lower side is the green next to golf course hotel, the rest of the stretch towards town is garden city.

Please send MM to my phone 0772------for the free tour of Kampala.
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+1 #6 WADADA rogers 2018-02-21 15:54
I am not surprised, many Ugandans will soon relocate to the village, the economy is doing so badly, i will talk to my fellow NRM members to consider quitting power for people who can revamp the economy
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+5 #7 Kent Mawa 2018-02-21 16:34
Gentlemen , thanks for your response.
Of course I can tell that this is Yusuf Lule Road. I lived on Arcacia Avenue for several years.

Mine was a rather sarcastic question/remark because I did not see the connection between the photo and the line immediately before it , namely :"N-Bridge hotel is an imposing facility perched atop Namirembe hill in the capital, Kampala"
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