The Economic Factors Affecting Demand of Mortgages as a Source of Finance for Housing Projects in Uganda: Case Study of Housing Finance Company of Uganda Limited

Abstract

The housing sector through mortgages as a source of finance in Uganda has suffered severe decline in 2.5 decades after independence and has had a negative effect on the human settlement in general (HFCU handbook). The housing conditions and infrastructures were affected as a result of the poor performance of the economy and subsequent land wars experienced by the country at that time. Thus housing sector is characterized by acute shortage of suitable accommodation caused by slow growth of hosing stock (HFCU Handbook 2002). Housing Finance Company of Uganda Limited was incorporated in 1967 as a non-bank financial institution with the objective of mobilizing for purposes of lending such funds to customers to enable them build or purchase houses through mortgages. It was the only non-bank financial institution by then in country. Mortgage is a loan which one gets from a bank or a building society in order to buy a house. In Uganda mortgage industry is governed by mortgage decree of 1974(HFCU Handbook 2002) Housing Finance Company of Uganda Limited began in Kenya with shareholders Kenyan government, Common Wealth Japanese Development fund, German Development Corporation and International Finance Corporation (HFCU Handbook). During the 1970s technical assistance to company was discounted due to the political and economic atmosphere at the time. By 1981 the company was in a sorry state and 1983 mortgage operation of company suspended only to be resumed again in 1984 (HFCU handbook). It’s not against this background that most population is not aware of this facility being provided by financial institution and therefore the basis of research will shade more light on the mortgage scheme for housing projects.