| Monday, 16th May, 2011 | | |||||
THE prices for local building materials haveshot up, industry players have said. They said prices of sand, stones, stone aggregates and timber have increased in the recent past. An average-sized clay brick is sh300, from sh220, while a two-tonne Elf tipperful of sand, is sh100,000 from sh70,000, depending on the distance to the site. Godfrey Lukwago, a sand and bricks dealer in Namasuba on Entebbe Road, said the increment was partly due to the general rise in prices of all goods in the country. He added that there was also a shortage of quality building materials like sand and stones aggregates. The retail price for a 50-kg bag of cement has increased to 26,000, from between sh24,000 and sh25,000 less than a month ago. A 10-feet, 30-gauge coloured iron-sheet is sh45,000 or more, from sh43,000 a month back. | ||||||
Tuesday, 17 May 2011
Prices of local building materials increase!
Monday, 16 May 2011
Move to raise interest rates will hit mortgage sector!
According to a Central Bank of Kenya mortgage finance analysis released in November 2010, Kenya’s mortgage rate to GDP ratios remained low — at 2.48 per cent. Photo/FILE
Industry players are cautioning against price wars in the mortgage market as commercial banks across East Africa race to meet the rising demand for homes and commercial buildings.
They fear that the move by central banks across the region to raise interest rates — expected soon — in a bid to protect their economies from inflationary pressures and weakening currencies, would mean home owners pay more on their mortgages.
Among other incentives, banks have been reducing interest rates on mortgages or offering full property financing in order to woo more customers.
But Frank Ireri, managing director of Housing Finance, said rather than reduce interest rates, mortgage lenders were better off engaging in product innovation to grow their home loans.
He said pension backed mortgages that allow borrowers to use up to 60 per cent of their pension benefits to secure a mortgage from a bank or take an ordinary loan are among such innovations.
Kenya’s CFC Stanbic Bank for example, is among those offering its clients 100 per cent mortgage on property.
“We are providing a solution to potential home buyers who were unable to access mortgages due to the requisite deposit they must make on the property,” said Elly Odhong, the head of personal and business banking at CfC Stanbic.
However, to qualify for the loan the property must cost between Ksh3 million ($35,300) and Ksh10 million ($117,650) — a clear indication that the bank is targeting the high income earners, a statement Mr Odhong refutes.
“CfC Stanbic has aligned its mortgage finance products to appeal to a wide segment of potential home buyers and we understand that each segment is unique,” he said adding that the main qualification criteria is the customer’s ability to meet their obligations which include repaying the loan.
Barclays Bank Kenya on the other hand is advertising an 11.9 per cent interest rate, which the bank is pitching as the cheapest home loan in the market.
According to a Central Bank of Kenya mortgage finance analysis released in November 2010, average interest rates on home loans stood at 12.59 per cent for the large banks.
Real estate received the lion’s share of credit at Ksh46.52 billion which was 29.8 per cent of the total credit ($553,800 million) to the private sector in the 11 months to November 2010, according to Central Bank of Kenya’s December 2010 monthly economic survey.
In Uganda, banks have also been increasing their exposure to the real estate sector.
“The share of foreign currency loans to the building and construction sector rose to 17 per cent in February 2011, signalling banks’ rising exposure to this sector,” said the Bank of Uganda in its latest monthly economic survey of March 2011.
Building and construction only accounted for 8.9 per cent of loans in the foreign currency loans in December 2007.
Potential for low-cost housing projects in Uganda!
An example of the four-bedroom houses of the Kensington Luxury Heights development in Kampala, Uganda.
Uganda’s property sector holds considerable potential. Jaco Maritz spoke to the general manager of Kensington Real Estate about her company’s current projects and where the opportunities lie in Uganda’s property market.
Give us a brief overview of Kensington’s major projects in Uganda to date
Kensington Real Estate is a key player in Uganda’s real estate scene. It is an international corporation with offices in Kampala, Dubai and London, [and] with sister concerns in Ghana and India. Our first development in Uganda was the Sunset View Homes. We then developed Kensington Signature Homes comprising only eight spacious four-bedroom homes of about 250 m2. Kensington Luxury Heights is our current and biggest development to date with 149 houses ranging from two- to five-bedroom homes. We offer homes for the different stages in life, from the single occupant to a family household. The complex will provide residents with a private lifestyle offering a fully serviced commercial centre, recreational area, nursery school, sports facilities and a lot more. All of these projects are situated in the capital, Kampala.
It looks as if Kensington is mainly involved in providing housing for the upper-end of the market. Are there any plans to develop low-cost housing estates?
Our developments differ. Sunset View Homes and Kensington Signature Homes were built for the upper-end. Our current development, Kensington Luxury Heights, situated in Kisaasi, is not specifically designed for an exclusive class of people. Our home owners are quite diverse and anybody who has a high standard lifestyle and a dream of owning a home can do so. Yes, we do have plans for low-cost houses in the future.
How well developed is Uganda’s mortgage industry? Is it easy for Ugandans to get mortgage facilities?
The mortgage market is still at the primary level. Given the high mortgage interest rates, it would take a while before the market reaches a fully fledged secondary level. Property prices for both rentals and sales are quite high, and not proportionate to salary levels. While a number of banks are providing mortgage financing, houses on the market today are still out of reach for the majority of Ugandans who would want to own a home.
Where are the major opportunities in Uganda’s property sector?
Low-cost homes. Currently most developers have targeted the middle- to upper-income bracket. The current housing estates are located about eight kilometres out of [Kampala's] city centre. The government needs to assist developers by constructing good roads, like the recently opened northern bypass. Traffic jams are a discouragement for people who want to reside out of the city centre.
With a population of about 26 million people and one city, there is definitely room for expansion. Developing satellite towns with adequate facilities on the outskirts of Kampala will be most ideal and also see some development in other small towns. We have [also] seen a rise in the development of commercial buildings of international standard.
What is your message to foreign property developers looking to invest in Uganda’s market?
I would advise developers to study the market, once you choose your segment then build accordingly. Property development still has great open potential in Uganda. There is a serious shortage of housing especially for the lower-end [of the market] although the land prices can be prohibitive. Slowly the concept of cluster houses is being accepted. Kensington Africa Limited is one of the pioneers in housing estate [developments] and has been instrumental in changing the attitude of people towards cluster living.
Kensington Homes to be ready by July!
Kensington is a young and dynamic brand home development company with professionalism, integrity, creativity and entrepreneur flair. It represents a passion for real estate and success for its clients.
The company general manager Ms. Lynnete Chiromo explained in an interview that all the 149 homes and a commercial centre will be ready for occupancy by mid this year. "So far 45 homes are already occupied, full completion and occupancy will be in July this year," said Chiromo.
She said the high inflationary levels currently affecting the country have had no effect on the development of the homes. "Inflation, no it has not affected us. The delays we had were experienced during the credit crunch that hit the world not the current inflation," she noted.
Uganda is currently facing high levels of inflation. According to figures that were released by the Uganda Bureau of Statistics recently, year on year inflation jumped from 11.1% to 14.1%, while food inflation surged to 39.3% from 29.1% in April this year. For the construction sector according to UBOS, constructing a residential building or a commercial one is becoming harder as prices of construction materials are shooting up.
In the first quarter of the year, it recorded tremendous increases in the prices of timber, clay bricks, tiles, and water and iron sheets, indicating that people had exceeded the normal expenditure.
Chiromo indicated that people can acquire Kensington homes by either cash payment or through mortgaging.
She noted that to acquire a two bed-roomed house, one has to pay around $89,000 (Ugs213.6m) while a three and four bed-roomed house costs $159,000 (Ugs381.6m) and $209,000 (Ugs501.6m) respectively. A five bedroom home goes for $289,000 (Ugs693.6m).
Firms set up real estate body
A number of companies in Uganda have entered the real estate business yet there are no specific laws to regulate their establishment and operation.
This is why real estate developers have set up an umbrella body to regulate and set standards in the booming sector.
The Uganda Home Builders' Association (UHBA) first conceptualized in 2008 when the country hosted the International Housing Association meeting in Kampala is set to be launched in June with a host of activities lined up including a real estate exhibition, a golf tournament, among others.
The association currently has eight pioneer members including the National Housing and Construction Company, Akright Housing, Kensington Heights, among others.
Ms. Elizabeth Rumanyika, the President of UHBA told East African Business Week in an interview that registration of new entrants is ongoing and urged other players in the sector to join the association to share challenges and goals.
"Our goal is to push for reforms and policies that will enable us have a strong and single voice towards solving similar challenges, while at the same time channeling our efforts towards a similar cause," said Rumanyika.
She said the association's main aim was to push for self regulation as is the case in many countries.
This she said would enable the home builders gain credibility as they would be able to consolidate the ideas from the members because they (real estate developers) are aware of the challenges that face them.
"Enforcement is very pivotal because we currently have policies and very good ideas and yet we cannot implement them because we do not have the powers to regulate ourselves."
Currently, real estates are regulated by the town and county planning boards under the statutory body of the physical planning unit, which is only responsible for approving construction plans of residential houses without going into the detailed site plans.
Ms. Rumanyika also added that clients who need advice regarding home ownership can be helped by the association as they will be readily availed with information.
"In order to build or acquire a good home, you will need someone who is well established and can be trusted; someone who has the knowledge and skills in constructing a new home.
“The association is therefore the place to turn to because unlike the old days, today people are focused on simplicity, efficiency and practicality. Simple architecture is the order of the day as home owners want to create spacious houses", she added.
Industry experts have also pointed out that Low-cost housing programmes, spearheaded by the Government, would help more people acquire shelter, but they are ineffective.
Lack of low-cost houses accounts for 65% of the housing deficit in the country.
Ms. Rumanyika said that the Uganda government should borrow a leaf from Kenya, where the government facilitates home developers who are building low cost houses so as to provide customers with affordable housing.
"Infrastructure development is very expensive, let alone the acquisition of land and the hustle associated with it. If government could provide land and also subsidize taxes, then people would be able to acquire low cost homes", she added.
Tuesday, 3 May 2011
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