UGANDA, Kampala | Real Muloodi News | For the typical Ugandan, saving for your dream home can take many years. Banks and real estate firms may be a financing option for those that qualify for a loan or mortgage. However, high-interest rates result in financial pressure, and affordable housing stays a dream for many. Prospective first-time homeowners are now looking into purchasing a condominium as a more affordable path to achieve this dream. Shabbir Tayabali, a director of Aqeeq (U) Limited, which develops condominiums, explains:
“This might not be your dream home, but condominiums are offering you the first step to owning a home. The average Ugandan takes 15 years to be able to build their first house.”
If you like the idea of escaping rent and owning your own unit in a multiple unit building, it is essential to understand how condominiums work.
What is a Condominium?
While condominiums (or ‘condos’) and apartments are similar, they differ in ownership. An individual can purchase a condo, as you would a house. Whereas apartment units cannot be purchased separately. An apartment building typically has one owner, with units leased to individual tenants.
Barefoot Lawyers, an online Legal Services Provider in East Africa, defines a condominium as a housing unit where each resident owns their separate unit space. There is collective ownership over shared spaces such as corridors, security, recreation areas (rooftop, green areas), driveway and parking. There is no individual land ownership with condominiums. They point out:
“The main difference between condos and regular single homes is that there is no individual ownership of a plot of land. Instead, all the land in the condominium project is owned jointly by all the homeowners, as is the case with Bugolobi and Bukoto flats.”
Who Owns the Title?
Vincent Agaba, the managing director at AVARTS Housing Ltd, explains that under the condominium arrangement, each unit owner holds a title to the purchased units. In addition, there is also a master title for the land owned jointly by all the homeowners.
Ms Claire Kateregga, customer relationship manager, Build Net, notes that with condominiums, the main title is taken to the Lands Office. “The title will show that if a ground floor has four units, each unit will be owned individually,” she says.
Ms Kateregga adds; “Being an individual property owner guarantees you to do all you want with the interior design. But with the exterior design, you must collect everyone’s ideas.”
Pros of Condominiums
Cheaper than Houses
There are some exceptions to the rule, but most condominiums are cheaper to buy than houses. It is a great way to get into property ownership for the first time, or for retiring seniors with less income who are downsizing.
Low Maintenance
Condos typically have less inside space to clean than houses, and the only outside space you have to worry about is your own balcony. As a result, chores like repainting the exterior of the house or maintaining the garden will become a thing of the past.
More Secure
Would-be thieves often have to pass through several layers of security to get to your condominium door. Many buildings will have locked security doors at their entrances that require a key or swipe card to access.
Amenities
Condo living can give you access to amenities you may not otherwise get with a house. For instance, swimming pool, indoor gym, rooftop entertaining, covered parking and a security system. And you don’t even have to maintain the pool yourself!
In Demand
Renters are not going anywhere. Kampala is expected to have a housing shortage of around 530,000 homes. In ten years, this may lead to 2.1 million home shortages. As such, if you decide to transition from owner-occupier to landlord, you should have no issues getting tenants.
Likewise, there is plenty of demand should you decide to sell. Ivan Niyonzima, the owner of Property Services Ltd, says that condominiums allow investors to sell their homes quickly while still earning significant profits on a small scale property.
Cons of Condominiums
Limited Parking
Not every condominium comes with a parking space, especially one-bedroom units. You may have to pay a premium for parking, or deal with endlessly looking for street parking. Likewise, parking can also be a challenge for your visitors.
Less Space
The main reason apartments are usually more affordable than houses is because they’re typically smaller. While this means less cleaning, it also means less storage space which isn’t ideal for a bigger family.
Privacy and Noise
Living so close to your neighbours, you’re going to see and hear them a lot more than you would in a private house. Incidents such as loud parties and domestic disputes can disrupt your peace.
Fees
When you buy a condominium, you’re responsible for a share of the upkeep and maintenance of communal areas of the property, including the gardens, rooftop space, elevators, stairwells, halls, etc. This comes in the cost of paying a monthly fee to cover the expenses.
How are Condominiums Managed?
Typically, under a condominium agreement, owners form a condominium association where they select the head of the association, secretary and treasurer. The association heads manage the condominiums, ensuring that cleaning, garbage collection and electricity dues are collected from the owners and paid.
Usually, condominiums also have a reserve fund. This is the amount of money the association sets aside to make repairs on the shared property.
The individual condo owners maintain the inside of the units they own.
Cost of Purchasing a Condominium
Condos typically come in one-bedroom, two-bedroom or three-bedroom designs. The costs vary from developer to developer, and are also dependent on the area they are in. Condominiums are well-known in areas such as Kira, Naalya, Najjera, Kololo, Muyenga, Namugongo and Bukasa.
Shabbir Tayabali, a director of Aqeeq (U) Limited, which develops condominiums, explains, “Under the arrangement, you can have a one, self-contained bedroom, open-plan kitchen, sitting room and dining room on 40 square metres at USh53 million. A two-bedroom with the same amenities on 63.73 square metres at USh115 million, and three-bedroom on 79.52 square metres at USh130 million.”
Comparatively, Annet Babigamba, sales executive at Universal Multipurpose Enterprises (Affordable Housing Uganda), prices them slightly higher quoting a one-bedroom at USh96 million, two bedroom at USh172 million and three bedrooms, USh189 million.
In most upscale neighbourhoods surrounding Kampala, the typical cost of a three-bedroom condominium unit is from USh250 million to USh300 million.
“Affordability goes with mass production; just like commercial farming verses subsistence where mass production causes the prices to drop; the costs go down when more units are put up at a go, with time, the condos end up becoming cheaper,” Babigamba says.
Payment Terms
Babigamba explains there are various financing options to purchase condominiums. A buyer typically deposits USh5 million (flexible amount). He /she can pay a 20 to 30 per cent cash down payment within the three months, and the balance over a period of 12 to18 months.
“You can pay cash, use special payment plans with developers or get a mortgage with banks. For arranged payments, you get a unit and clear in a year or two. With banks, you can get a mortgage that can run up to 20 years but you will be paying interest,” she said. Mortgage interest rates in Uganda range between 18 – 21%.
Citing an example; if a unit is USh90 million; a person will pay 20 per cent initial payment of USh18 million. The balance which is 80 per cent of the purchase is paid in instalments for a period up to 12 months.
She notes this plan is negotiable, especially to someone who may not afford to pay USh7 million a month.
“There is also financial support from the bank to clear the debt which is done within 12 to 15 months. Property developers do not charge interests until the debt is cleared,” Babigamba said.
What else should you know?
The Condominium Property Act of 2001 governs the development and ownership of condominiums in Uganda.
As with most construction projects, the Act requires the developer to submit a condominium plan to the registrar of titles, conforming to certain requirements. This plan is what permits the division of a building on a piece of land (called a parcel) into condominium units, each of which will have their own separate titles. The plan must meet the requirements under Section 9 of the Act.
Establish Ownership
Elvis Mugwanya, a property manager, says before buying a condo, it is important to first do research about the rightful owner, as with any property purchase. Condos are easy to sell, and therefore tend to exchange ownership often, a fact fraudsters can take advantage of.
“One of the most important things you have to do before making payments is to look for the rightful owner of the property, and have clear agreement with them. As a buyer, you should review all financial records from the seller, especially recent property taxes. Make sure all the bills and receipts are cleared before signing the agreement,” Mugwanya advises.
Mugwanya adds that because condos have several complicated laws and regulations, the buyer should carefully review the blueprint to determine what is covered by the seller to avoid more costs, especially with the authorities.
Be Informed About Restrictions
Condos are independently managed, and may have restrictions in terms of renovations and may prohibit certain developments.
There are also restrictions on what a property can, and cannot, be used for. Typically, residential condos cannot be used for commercial purposes, even if that is something as simple as a “home office”. Many condominium associations have now added restrictions specifically related to short-term rental arrangements.
“Before buying, look through the restrictions because the rules will guide you on whatever you want to put in place, even the colour of your outdoor matters,” Mugwanya says.
Land Under Leasehold
The Registration of Titles Act, Cap 230, notes that condominiums are already on registered land, so condominium titles are the same as any other land. Pay attention if the units are on land under the leasehold tenure.
The leasehold property reverts to the legal owner of the property on the expiration of the lease. As such a condominium unit built on leasehold, the land will revert to the owner upon expiry. Therefore, understanding leasehold principles is critical before purchasing a condominium.
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