Here’s how much money a Kampala household must earn to buy a new home

NHCC's Rwizi View Apartments in Mbarara. The minimum monthly mortgage payment on the apartments is about Shs3 million. Photo: NHCC
NHCC’s Rwizi View Apartments in Mbarara. The minimum monthly mortgage payment on the cheapest unit is about Shs3 million. Photo: NHCC

Government is planning to take full control of the National Housing and Construction Company, in part due to concerns about the lack of affordable and decent housing, according to state minister for housing, Chris Baryomunsi.

Baryomunsi was delivering a ministerial statement on the state of housing in Uganda on Thursday. He also briefed Parliament on the new national housing policy, which was approved by cabinet in May 2016.

Read More: Government to take full control of National Housing, minister says

In a foreword to the policy, Daudi Migereko, then housing minister, said it seeks to ensure “adequate housing for all” through partnerships between the government, the private sector, land owners, financial institutions, cooperatives, and individuals.

Migereko acknowledged that housing in the country is inadequate “in terms of quality and quantity.” There is a shortage of about 1.6 million housing units (210,000 of those in urban areas), while about 900,000 units are sub-standard and in need of repair or replacement, he said.

To reduce that deficit, the policy aims to “increase the production of adequate housing for all income groups from 60,000 to 200,000 housing units” each year until 2022. It also intends to “to increase access to affordable housing; to improve security of tenure for property owners; and to improve the mechanisms for development and management of the real estate industry.”

In addition to providing utility services like electricity, water, and sewerage, government will also “leverage access to affordable financing for housing development,” Migereko said.

Indeed, government officials acknowledge that current financing for housing is on the high side. “One of the challenges we have in the housing sector is the lack of long-term credit which is affordable and sustainable,” Baryomunsi told parliament. “The development of housing has largely been left to the market forces led by the private sector with little participation by government.”

Through the National Housing and Construction Company, government hopes to play a larger role in increasing the supply of affordable housing. But first it must buy back the 49% stake it sold to the Libyan government in 2005. After taking full control of the NHCC, it will capitalise the company with Shs100 billion – in the 2016/2017 financial year, according to Baryomunsi – so it can carry out key projects.

How affordable – or unaffordable – is housing in Uganda that the government seems to care more about the cost of acquiring a home? Most Ugandans build their homes, financing the process with a mixture of savings and loans. The various costs they incur are not tracked, however, rendering an evaluation difficult. Instead, we shall use mortgages to gauge how much money an average Ugandan household would need to buy a new house.

(The following analysis borrowed a lot from Emmanuel Sabiiti, head trader at Boston Common Asset Management in Boston, Massachusetts.)

The average monthly nominal income of a household in Kampala is Shs976,000 ($287.62), according to the Uganda National Household Survey 2012/13. It is also the highest regional income in Uganda; the national average, on the other hand, is Shs453,000 ($133.50).

According to Knight Frank’s Uganda Market Update for the first half of 2016, commercial bank mortgages during the period ranged from 18% to 24%. The median rate, which this analysis will use, is 21%. We’ll get figures for 15-year and 30-year mortgages which require a down payment of 20%.

The average Kampala household earning Shs976, 000 can afford a home worth Shs30 million ($8,798) if it is to pay back the mortgage in 30 years, according to the affordability calculator we used. The most affordable loan it qualifies for is about Shs24 million, with the down payment at Shs6 million. Monthly payments, spread out over 30 years, would be Shs417,400 ($123).

If it decided to get a 15-year mortgage, the average Kampala household would be able to afford a home worth Shs24.5 million ($7,214). It would get a home loan of Shs19.6 million ($5,771) after making a down payment of Shs4.9 million ($1,443). The estimated monthly payment for 15 years would be Shs420,825.

We also looked at the houses and apartments that are currently on sale by the NHCC to see how much they would cost if you took out a mortgage at the median rate (21%). NHCC’s website says only four projects are currently on sale. They are Nalya Pride Apartments, at a cost of Shs315 million for each unit; Jasmine Apartments, also in Nalya, at Shs436,541,165; Namungoona Phase IV Estate at Shs290 million per unit; and Rwizi View Estate in Mbarara at Shs299 million for the three-bedroom units and Shs199 million for the two-bedroom units.

If you took out a 30-year mortgage for the cheapest of NHCC’s available projects, the two-bedroom unit in Mbarara which costs Shs199 million, you would have to pay Shs3.5 million per month. A 15-year mortgage for the same unit would make more financial sense at Shs3.6 million since the total payment would be lower. Those figures do not factor in the down payment, however.

Taking into account a 20% down payment, which is Shs39.8 million, a 30-year mortgage for the cheaper unit in Mbarara would require a monthly payment of Shs2.8 million. On a 15-year mortgage you’d have to pay Shs2.9 million monthly.

Other charges by banks to process and insure the mortgage were not factored into the estimates, meaning you’d probably pay a higher amount. The question is, how many people in Kampala, or for that matter Uganda, can afford a Shs3 million monthly payment to a bank, let alone the Shs40 million down payment?

5 Comments

  1. if the average monthly income according to world bank standards for Uganda is 2.2 million and a lot of the middle income people I KNOW in Uganda DO NOT come close to half this average income monthly how do you expect such a project to be meant for Ugandan people?

  2. I would want to think that these expectations of 3m per month are meant for the rich. We are not saying this because we are impoverished, but lets be honest. How many Ugandans can afford to give away 3m monthly let alone the other monthly expenses. I like the idea of 400,000/= per month. sounds affordable to me. Otherwise, we tire of paying monthly rents per month yet it does not come cheap and if put together can build me a house in a few years. Also NHCC is so unrealistic. How can one say a 2 bedroom house at 150m is for middle income people. Really??? Please try to come down to planet Uganda. Stop your arrogance and selfishness. I looked at the 150m houses with just 2 bedrooms???? Really??? Try giving it to me and I will build you a much bigger house. You can build low cost houses for middle class Ugandans. Probably 2 rooms and let one live in own small house as they work harder to build better ones in the future. Its just a matter of honesty. Build for the rich if you like but don’t lie that its for middle yet for rich class guys. Yayaya!!! I know this is not charity but honestly you guys can buy materials in bulk and cheaply and still get profits.

  3. I concur with Namakula; making quotations of 3M monthly mortgage payment and classing them as low and mid income Ugandans is really very laughable. It sounds like NHC thinks all Ugandans are thieves because most of the buyers of apartments are largely gov’t thieves. Otherwise an ordinary citizen in a country without a minimum wage, well, for starters, we can only talk of prices at UGX 400k to 500K mortgage per month if we are indeed honest to Ugandans.

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