JOEL OGWANG
For many a retiree, the quest to ensure a sustainable lifestyle outside the departed salary environs is a tough call. Even with your retirement package, where do you invest to ensure a handsome return that keeps you going?
According to Michael Mugabi, the acting Housing Finance Bank managing director, real estate is still one of the leading and dependable income options to consider.
"Uganda has a housing deficit of over 2.4 million units at a rate of 200, 000 units per annum," he said during the NSSF Money Talk symposium 2019.
"About 61% of the working class live in rented houses and 90% of household live in rented apartments for up to 3-years then shift into another rental. So, real estate is still one of the dependable income options to consider as you go into the 3rd phase of your life."
MORE HOUSES NEEDED
Yet again, over 50% of retirees spend more than half of their benefits on solving shelter-related needs, Mugabi says, adding that Uganda’s +40 million population growing at 3% annually and urbanization growing at 5.2% annually compound the shelter need.
"Real estate is stable, has value and allows incremental accumulation of wealth whilst offering financial solutions. Nobody should retire before having their housing issues addressed," said Mugabi.
"Many Ugandans are building incrementally and banks are partnering with them. They spend 5-10-years constructing incremental houses. HFB can avail up to Shs300m for someone to buy land as well as develop it."
Whilst banks are not in the business of selling houses but facilitating home acquisition, the fact that only 20% of land in Uganda is titled is no longer a challenge as before.
He urged Ugandans to consider mortgages in place of monthly rental payments.
"Someone may say; why invest sh50m in land acquisition and build a house of sh150m yet you will earn sh1m in rent monthly? But if a house is in a well planned setting, capital gains will increase over time," he said.
For a year, you will earn sh12m with a growth rate of return on investment of 6%. The income component is much smaller part of the capital gains return.
HOUSING DEGRADES ENVIRONMENT
Kenneth Kaijuka, the acting National Housing CEO, argued that whilst housing infrastructure is the cradle for all other infrastructure needs and that buildings add value to land to create real estate, housing degrades the environment.
"Where you see a building, you may never recover that land for agriculture, for example. Housing is a long-term investment and returns can also be long-term," he said.
"The risk of development to the developer may be 100% but this is not the case with condominiums where you buy a finished product."
HOUSING DEFICIT
Uganda has a deficit of eight million units for permanent houses that last 50+ years, a deficit of six million for semi-permanent (20+years) and a deficit of four million units for temporary houses (10+years), according to the National Housing Policy 2016.
"At current rate, we are constructing only 60, 000 units per annum yet the desired rate is 200, 000 units," said Kaijuka.
"So we need to do much more to address the housing deficit in Uganda."
Richard Byarugaba, the NSSF managing director, noted that about 80% of savers think they know what to do with their money but, within two-years, have exhausted all their savings!
A worker’s financial life cycle includes 20-years of work involving more human capital development than financial, spend on a house, insurance and aggressive investment.
In the preservation stage (40-60 years), a worker should shift from high risk stock to low risk bonds as they prepare for retirement.
"Please, don’t take a mortgage at the age of retirement," warned Byarugaba.
Obviously, at 60-years, you are ‘in the mood of going away’ so distribute your wealth.