Uganda’s housing situation is characterized by inadequate homes in terms of quality and quantity in both rural and urban areas. Uganda has a deficit of 2.1million housing units out of which 210,000 units are in urban areas and 1.395 million units in rural areas. An estimated 900,000 units are substandard and in need of replacement or upgrading[1]. By 2030, the population growth (at a rate of 3% per annum[2]) is expected to require more than 3 million more housing units[3].
On 10th May 2022, the cabinet minister for Finance, Planning and Economic Development, Hon. Matia Kasaija launched The Uganda Retirement Benefits Authority (Assignment of Retirement Benefits for Mortgages and Loans) Regulations at the Uganda Media Center in Nakasero-Kampala City. These regulations allowed the assignment of retirement benefits for mortgage facilities specifically for acquiring or constructing a residential house. He emphasized that the major objective of the regulation is to ensure that the people have decent shelter so that they do not suffer from homelessness and indignity.
The regulations provide that to use the accrued benefits as security for a mortgage, an individual should be a member of a retirement benefits scheme licensed by URBRA for a period of not less than ten years and can access up to 50% of the accrued benefits to be able to secure the mortgage facility.
However, individuals of the retirement age (different pension schemes have different retirement ages for instance NSSF retirement age is at fifty-five (55), Parliamentary pension scheme retirement age is at forty-five (45) and other schemes have their retirement ages set though not disclosed to the public) and those who have left employment are not eligible to access the mortgages using accrued benefits as security.
Individuals in entities managed by Uganda Retirement Benefits Regulatory Authority such as National Social Security Fund(NSSF), Parliamentary Pension Scheme and Housing Finance Bank Retirement Benefits Scheme can secure a mortgage as long as they comply with the conditions set. The conditions for the mortgage are as follows; –
- The mortgage must be purely used for acquiring or constructing a residential house.
- The mortgage repayment cannot exceed twenty years.
- An individual must be a member of the retirement benefits scheme for not less than ten years.
Breach of Terms.
- In case a person contravenes the regulations, they are required to pay a penalty. The fine is up to Ugx. 1,500,000 or imprisonment not exceeding one year
- In the event that the person continues to contravene the terms, an additional penalty of Ugx. 1,000,000 in respect of each day on which the offense continues.
It has to be noted that the regulations have been enacted at a time when the country is grappling with an economic crisis defined by inflatory commodity prices. The inflation rate as measured by the Consumer Price Index for Uganda has risen from 4.9% as of April to 6.3% as of May,2022[4].This has in turn affected the prices for construction materials with the retail price of cement increasing from Ugx.28,000 – 30,000 to Ugx. 45000-50,000 thus a high price increment of 50-68% as of May,2022. This will in turn limit establishment and renovation of structures by households thus accelerating the housing deficit and the expansion of the informal settlements. This means that it is hard to acquire a lump sum amount to construct/purchase a residential house. Therefore, URBRA provides the means to finance a residential house with a secured mortgage.
To access these accrued benefits as security for the residential mortgage, an individual fills the forms provided in Schedule 2 and 3 of The Regulations which entail; Application to Use a Proportion of Accrued Benefits as Security and Assignment of Accrued Benefits. On top of these, the financial institutions will specify the additional criteria to follow to secure this specific mortgage.
Conclusively, the new regulation will partly solve the current housing crisis faced by the country when fully operationalized and utilized.
[1] Uganda Bureau of Statistics-Uganda
[2] UBOS –World Population Day Celebrations_Saturday_July_11,2020- Leveraging Uganda’s Population Dynamics for a Resilient Future amidst COVID-19
[3] Habitat for Humanity-Uganda
[4] UBOS-Consumer Price Indices and Inflation Rates-May 2022