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KCB plans to enter the Ugandan mortgage market next month as it seeks to tap into new financing opportunities in the real estate sector and diversify its property business from the highly competitive Kenyan market.
KCB, through S&L, its mortgage financing arm, said it will start offering credit facilities to real estate developers in Uganda to enable them supply new housing to meet growth in demand expected from increased incomes following the discovery of oil.

The lender already has 14 branches in Uganda, and is listed on the Nairobi, Uganda, Dar-es-Salaam and Rwanda stock exchanges.
The Ugandan mortgage market is relatively underdeveloped compared to Kenya’s.

“There is a huge financing opportunity in the Ugandan market where developers are rushing to meet rising demand for housing,” said Ms Carol Kariuki, the divisional director of S&L.

KCB will be banking on shortage of financing options in the country amid a projected sharp rise in demand for housing in Uganda’s major towns as oil revenues increase average household incomes.Housing Finance, DFCU, Barclays and Standard Banks are the main mortgage financiers in the country.

Ugandan banks charge higher average interest rates than their Kenyan counterparts, presenting a lucrative opportunity for KCB.
A recent survey by the Bank of Uganda showed that residential mortgages were priced at an average of 22.02 per cent while commercial mortgages attracted 21.81 per cent annual interest.S&L has the opportunity to earn premium returns of up to 8.5 per cent above the 13.5 per cent average Kenyan mortgage rate, while developers can negotiate for even lower charges.

While competition has pushed lenders to provide up to 100 per cent loans against market value of property, home buyers in Uganda need to raise 30 per cent as deposit. “The Ugandan market is more attractive to lenders and developers than Kenya,” said Ms Kariuki. “But we are still keen on growing our lending in the local market.”

Already, oil prospecting companies including UK based Tullow and Total France have invested widely in exploration licences, with spill-over benefits expected in job creation and improved income levels.Its entry is expected to heat up competition in the home lending business owing to the size of the group’s balance sheet worth about Sh250 billion, with the director saying that the bank would invest “much as it takes”.

S&L will also be utilising part of the Sh8.8 billion loan received by the parent firm from the IFC to finance developers and later eventual home buyers, who it says are seeking money to put up residential and commercial properties to meet surging demand.

A joint survey by the Central Bank of Kenya and the World Bank reveals that the mortgage debt in Uganda is at only one per cent of the country’s GDP, which is low compared to Kenya’s 2.5 per cent and South Africa’s 33 per cent.

James Mworia, the managing director of investment firm Centum says that there is a strong growth in income levels in Uganda, which is translating into new demand for better housing.His firm, now cross-listed at the Nairobi and Uganda Stock Exchanges, has invested Sh100 million in the acquisition of a 300-acre parcel of land in Entebbe, which will be used in developing high end mixed use projects.
“The housing market is under-developed and a strong demand for high end housing is offering big prospects for developers,” said Mr Mworia.

He said the country was attracting new investments to support the anticipated start to the oil exploration, with prior estimates placing the reserves at 2.5 billion barrels on the Albert basin.

“Uganda is now attracting mining professionals from across the globe who need modern housing which is currently unavailable” said Mr Mworia.The attractiveness of the housing market has pulled in global real estate firm Kensington, which is developing high end housing to meet the surging demand

Source: Business Daily Africa




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