Real Estate Investing: Solving the Affordable Housing Crisis in Uganda
Affordable housing refers to housing units that are affordable by that section of society whose income is below the median household income.
In Australia, the National Affordable Housing Summit Group developed their definition of affordable housing as housing that is “…reasonably adequate in standard and location for lower or middle income households and does not cost so much that a household is unlikely to be able to meet other basic needs on a sustainable basis
Recent reports show that, Uganda is suffering from an affordable housing crisis. Some real estate investors may find this hard to believe. Still, there is no question that many are struggling. This presents some great opportunities for investors to both generate great incomes
Having access to quality affordable housing is fundamental to reduce poverty, improve equal opportunities and guarantee a sustainable growth: UN Sustainable Development Goals by 2030, is to put housing at the center of specific policies to reduce drastically the quantity of people living in conditions below the minimum standards.
So why are so many Ugandans finding it tough to find housing today, what advantages are there of investing in lower end housing, and what are the most profitable ways to engage in this sector?
The opportunities affordable housing offers real estate investors
There is an opportunity for the private sector, including real estate investors, to help increase the supply of affordable housing while potentially receiving positive tax benefits and risk-adjusted returns. Let’s explore the current crisis and what opportunities are available to real estate investors.
Luxury properties are trending. High-end home buyers are busy shopping, and this will only pick up by the end of the year.
At the same time, Developers are tearing down homes in Kololo to put up luxury condominium apartments.
While the attraction to luxury homes is completely understandable, and as much as four times the profits from, there are some solid reasons to get into affordable housing.
Problems Need Solutions
Lack of affordable housing is also a big issue for cities and local governments. They require a good mix of residents, desire their streets to look clean to attract business, want to reduce the cost of law enforcement and their own financial burden for providing housing.
Government agencies and politicians need ideas for creating solutions and will put money in, or at least offer tax breaks to those that come up with them. In some areas they should offer land to real estate investors that have plans for ‘higher and better use’ for it.
Providing a solution can be a win-win for all sides, help investors generate great incomes and help them to give back at same time.
Invest in Uganda affordable housing
Simply building more homes and apartments will not solve the problem. As building costs continue to increase, the average home sales price or rental rate rises with it. Acquiring the land or property for cheap while keeping capital costs, building costs, expenses, and management fees as low as possible are all crucial factors to being able to create affordable housing.
Building new properties is not the only solution. Investors can buy these vacant properties as a distressed sale, which allows flexibility in returns and the option for the investor to provide affordable rental rates or sales price depending on the market area and demand.
