An investigation into the ease to access mortgage financing for real estate development in Uganda

Abstract

The study was carried out in Uganda with a research topic, “An investigation into the ease to access mortgage financing for real estate development in Uganda” taking Kampala central division as the case study. The study was made up of four objectives namely; (i) to examine the current status of mortgage financing inform of procedures followed to obtain the financing, (ii) to compare the ease of attaining mortgage financing to alternative real estate financing methods, (iii) to determine the challenges faced by real estate developers in obtaining mortgage financing for real estate projects and solutions thereof in Uganda, and (iv) to propose more suitable strategies in obtaining financing for real estate developers in Uganda. A survey research design was applied for the quantitative data while a case study on Kampala was applied for the qualitative bit of the data. The data was collected through literature review, questionnaires, and interviews with the respondents. The study focused on 60 respondents of which 20 were bankers, 20 Valuation surveyors, 17 mortgage beneficiaries, 3 Urban planners. Both the qualitative and Quantitative data collected was analysed using Microsoft Excel and the Statistical Package for Social Sciences (SPSS). The results revealed four major conventional sources of mortgage financing in Kampala that is, Insurance companies, Commercial banks, Pensions funds, and Real Estate Investment Trusts (REITs). The respondents revealed that it is easier to attain mortgage financing through Commercial banks, Real Estate Investment Trusts, Pension funds and Insurance companies in that order. The study also revealed that it is difficult for real estate developers to acquire mortgage financing in Uganda. This was shown through the average response rate on of 3.27 on the Likert scale implying majority of the respondents disagreed to the ease of acquiring mortgage financing. The study went ahead to compare mortgage financing to other sources of financing Real Estate developments and there were a number of alternative methods including, Equity finance sources, peer to peer lenders, Mezzanine finance sources, Hedge funds, Venture-Capital-Backed Company loans and convertible debt instruments. The results indicated that it easier to access Real Estate financing through all these alternative methods compared to Mortgage financing. The study also revealed a number of challenges that is, High levels of bureaucracy, High interest rates, short repayment periods, and unfavourable terms and conditions. Several solutions to the existing challenges were suggested by the respondents and these included, easing the system of obtaining approval plans from the concerned offices, increasing the repayment period, improving communication and staff attitude, increasing the repayment period, reducing interest rates, and lastly reducing customer contribution.