Uganda’s Realty Remains Resilient despite Lockdowns

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Uganda’s real estate industry exhibited some resilience during the first six months of 2021 in spite of painful lockdown measures though with several struggling tenants, depressed landlords and a surge in the number of properties put up for sale by commercial banks seeking to recover money from distressed borrowers. Whereas some real estate industry players have predicted a slow growth for the rest of this year following the 42-day lockdown period that ended last month, general performance indicators recorded during the first half of 2021 point to a resilient sector ready to benefit from future economic recovery or boom. Many of key growth indicators fell by less than five percent in contrast with the leisure and hospitality sector which has seen revenues drop by more than 50 percent since the coronavirus pandemic broke out alongside several job losses and diminished cash flows experienced in many hotels and restaurants. The data compiled by Knight Frank Uganda shows average occupancy rates posted by high-end office buildings dropped from 84 percent during the first six months of 2020 to 81 percent during the same period in 2021. Average rental prices levied in high-end office premises fell by about three percent during the first six months of this year compared to the same period in 2020 in a market segment that usually charges tenants $14 to $16 per square metre. An extra 6,000 square metres of office space was added to the local property market during the first six months of 2021, the data showed. Average occupancy rates registered among high end, commercial residential units dropped from 70 percent during the first half of 2020 to 68 percent during the first six months of 2021 — a trend attributed to the peaceful conclusion of the January 2021 general elections and the return of numerous expatriate employees that had left Uganda shortly before the beginning of the first lockdown period that lasted from April to June 2020. About 1,000 expatriates left the country in March 2020 amid growing fears of being locked out of their native countries. In addition, 161 new residential apartments are currently under construction and are scheduled for completion within 18 months, Knight Frank data indicated. Notable demand for commercial showroom space was also reported in the agricultural sector, furniture, car trading plus foods and beverages sectors during the first six months of 2021. This is a positive growth signal that raises hard questions about client motives within the real estate industry. Whereas hundreds of real estate properties have been put for sale by commercial banks seeking to recover outstanding loans from defaulting borrowers since January this year, it is not clear how many of those properties will be disposed of before end of this year under harsh economic conditions that have triggered low consumer spending and poor investment appetite in many sectors. The Bank of Uganda has told commercial banks to offer credit relief to the borrowers who were hit hard by Covid-19 lockdown and not sell their properties. According to the central bank’s executive director in charge of supervision, Tumubweine Twinemanzi, people and institutions which acquired loans in the last 17 months are eligible to acquire relief and their loans should be rescheduled.