UGANDA, Kampala | Real Muloodi News | The Government of Uganda has announced that savers into approved retirement schemes will be eligible to use up to 50% of their accrued retirement savings as mortgage security for residential housing loans.
The Minister of Finance, Planning and Economic Development, Matia Kasaija made the pronouncement in Kampala on Tuesday, May 10th.
“With the new regulations, an eligible member of a licensing scheme for at least 10 years will be able to give up to 50% of their accrued benefits as security for a mortgage or a loan for purchasing a residential house before they reach retirement which in essence reduces the pressure on their retirement benefits,” Minister Kasaija said.
The offer is under the Uganda Retirement Benefits Regulatory Authority Assignment of (Retirement Benefits for Mortgages and Loans) Regulations, 2022.
The National Social Security Fund (NSSF) has also begun the process of amending the law (the NSSF Act) to allow members who are eligible for retirement or pension to exchange their accumulated benefits for newly launched home loans.
Members who have retirement plans registered and monitored by the Uganda Retirement Benefits Regulatory Authority (URBRA) are eligible for house loans under this condition.
Minister Kasaija added: “The key objective of the regulations is to ensure that retirees have a decent shelter so that they don’t suffer homelessness and indignity.”
According to NSSF Managing Director Richard Byarugaba, the NSSF Act currently guarantees complete protection of members’ contributions and benefits and prevents any charge or assignment of the same to a third party.
“This constrains the Fund from immediately implementing the recently issued regulations. Regarding this, we have commenced consultations with key stakeholders including the Fund’s supervising Ministry intending to amend the offending clauses in the NSSF Act,” Byarugaba said.
Byarugaba, on the other hand, stated that the NSSF has always advocated improvements to Ugandan legislation governing retirement benefits schemes, such as one that permits a portion of a member’s income to be used as collateral for a mortgage or loan to buy a home.
Byarugaba added, “This position is further disclosed by feedback obtained from our members during various post retirement surveys which show that over 68% of Fund beneficiaries spend their retirement money on land acquisition, home improvement and construction.”
Uganda’s housing situation is characterised by a lack of homes in terms of quality and quantity in rural and urban areas.
The National statistics indicate that the housing budget stands at a deficit of 2.4 million housing units and an estimated 900,000 units are substandard, hence requiring replacement or upgrading.
The elderly are the most affected group by the housing crisis in Uganda. They constitute 4.3% of Uganda’s total population, yet more than 98% live in rural areas.
“As people grow older, they spend between 60% to 90% of their time at home: they cannot work and they need a warm and secure environment. But as they grow older and less productive, their places of abode also get more dilapidated and need constant maintenance,” said Mr Kasaija.
Older persons are usually unable to maintain an adequate housing level, thus, affecting their physical and mental well-being and making them more vulnerable.
Despite their situation, older people consider having a house of their own as a symbol of autonomy and dignity.
Unfortunately, they are always unable to improve their housing conditions due to a lack of financial resources and social support. They eventually end up living in less desirable housing conditions, which affect their mental and physical health.
Due to the fear that they could retire without a decent place of abode, many Ugandans have always pressurised the government to allow them to use their savings as collateral security for housing loans and mortgages.
Some have suggested that National Social Security Fund (NSSF) should construct low-cost houses on the numerous properties it owns, and allow members to purchase the units using their savings.
Research shows that when members receive their lump-sum payment of retirement benefits, they spend up to two-thirds of the package constructing retirement homes, and the money sometimes gets used up before construction is complete.
The minister added, “URBRA’s initiative to issue regulations on mortgages and housing loans is timely.”
He also noted that the regulations will not permit the scheme members to access retirement benefits prematurely.
“Rather, accrued retirement benefits shall only be used as collateral for securing a mortgage or housing loan. The regulations will enable the member to acquire land on which a residential house has been erected: erect a residential house on land in respect of which the member has a right of ownership recognised by the laws of Uganda: renovate, add, alter or carry out repairs to a residential house owned or belonging to the member,” Kasaija said.
How to get Housing loans Using Retirement Benefits
Clause 7(1) of the new regulations states: “A member shall, upon obtaining a letter of offer for a facility, apply to the trustees to assign a proportion of his or her accrued benefits as security for a mortgage or a loan for purchasing a residential house.”
The eligible applicant will fill in a form, with particulars, including the name of the applicant, scheme and membership number, and the total amount of benefits accrued, and the percentage they would like to assign.
The applicant also needs to list the licensed financial institution they intend to secure the loan or mortgage, accompanied by a written commitment to pay the mortgage or loan in according with the terms agreed with the financial institution.
On the form, the applicant is also required to show proof that the loan is indeed for a housing project by indicating the location and particulars of the property.
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