• Sun. Jan 29th, 2023

UGANDA, Kampala | Real Muloodi News | The impacts of Covid-19 such as lockdowns, curfews and global supply chain disruptions muted economic development, stalled investments, haemorrhaged cash, and brought down enterprises of all sizes. Many borrowers who defaulted on their debts have lost their properties to creditors, with the number of properties advertised for auction doubling in the first half of this year compared to the pre-pandemic period.

In a highly publicised example, after defaulting on a US$30 million (USh100 billion) loan from a South African lender, an auctioneer announced his plans to sell off well-known businessman Patrick Bitature’s assets on May 18, 2022.

Before the conflict moved to several courts for litigation and arbitration, the advertisement shocked the local market and ignited a lively public discussion.

Vantage Mezzanine Fund II Partnership sought to sell Bitature’s properties, which comprised the Elizabeth Apartments in Kololo, the Protea Hotel (Skyz’s Hotel) in Naguru, the Moyo Close Apartments, and the Kololo Gardens, all of which are located in Kampala.

Bitature blamed the Covid-19 outbreak and delays in Uganda’s oil production, whose chain industries he hoped to engage in, for his problems in different public comments and legal challenges.

Bitature isn’t the only one struggling. 2,076 foreclosures were advertised Daily Monitor in the first half of this year, nearly twice the 1,102 properties advertised during the same period in 2019, pre-Covid.

The 2022 statistics show 346 properties being placed for sale a month, or 12 of them a day, this year. Topping the list of collaterals are vacant land, land with buildings (residential, commercial and unspecified) as well as land with developments such as farms and workshops.

The imminent forfeitures show borrowers losing big and small assets, among them family homes that have taken a life-time of savings to acquire.

Experts say the rising loan default rates from borrowers who took loans from banks, savings and credit cooperatives (Saccos), or private lenders are a warning indicator for the financial industry, which is now struggling with double-digit inflation.

More Personal Loan Experiences

Ms Joyce Namuddu was one of the fortunate ones when a relative intervened to preserve her rental properties from being sold over a loan she acquired in 2019 but couldn’t pay back.

The situation is different for Masaka resident and former textile merchant Mr Ismail Ssempijja, whose home and rental properties are about to be auctioned. He cannot see a way out of the situation.

Mr Ssempijja says, “my family house and some of my rental houses were advertised…I have not been able to save them, I am stranded”.

“I do not know what is going to happen, it is God to decide because the situation is too tough on my side,” he adds.

In early 2020, Mr Ssempijja applied for a loan to expand his company, with two years to repay the loan. Months after receiving the loan, the nation went into lockdown to stop the spread of the Coronavirus, and his livelihood was destroyed.

“My businesses collapsed. There is no money. I am engaging the bank, but all they want is the money. I would have paid if Covid had not disrupted us, this was not the first time I acquired a loan. I have always paid back promptly,” he said.

However, Mr Ssempijja said that despite instructions from the Bank of Uganda requiring commercial banks, credit institutions, and microfinance deposit-taking institutions to comply, his bank had denied his request to restructure the loan.

Through the Finance Ministry, the government unveiled several initiatives to lessen the impact of Covid on the economy, including a stimulus plan for struggling companies.

Worse, by April of last year, the Uganda Development Bank (UDB), the intended main distributor, had not received any transfers for the government’s initial USh1 trillion stimulus programme.

Parliamentarians expressed worry over the continued obscurity of the access process, which kept Ssempijja and other prospective beneficiaries out.

In contrast to him, Ms Sarah Aculang expressed optimism that she might prevent the sale of her rental properties.

“The bank advertised the property, but there were no buyers. So, we agreed with the bank on the amount I should pay every month … Buyers were offering way below the reserve price and this is when the bank reconsidered and we renegotiated,” she said.

Ms Aculang nearly lost the home due to a loan taken out in 2019. She invested some of the cash in her import company and used the money to finish a building.

The epidemic, however, suddenly struck and destroyed her companies. She experienced more bad luck when her daughter was involved in a car accident. They would stay in the hospital for months, using all of the resources at their disposal to provide for her treatment.

Although she and the bank have an agreement, she is worried about the auctioneer’s persistent efforts to sell her property and his “hostile” character.

She further claimed that although her home was not collateral, the auctioneers had written “for sale” on the wall of her home.

According to Ms Aculang, the creditor first took pictures of her residential property to serve as proof of her residence and was perplexed by how things changed.

Another auction notice for land on Bombo Road belonged to Mr Biraahwa Mukitale, a former Buliisa Member of Parliament (MP).

In response to a request for clarification, Mr Mukitale offered the cryptic possibility that it was “trickery” by “someone attempting to gain a pound of flesh.”

Bank Mortgages

Ex-MP Mukitale, also a school owner and real estate broker, claims that debtors are having difficulty and that an increase in auctions might cause the financial and real estate markets to become unstable.

“Banks are going to have problems because if you put all these properties on sale, then you will have a whole collapse because properties have been selling expensively, but new buyers may not be willing to pay so highly,” he said.

He said that, although being a realistic move to stop growing inflation, the Bank of Uganda’s decision to raise the central bank rate (CBR) will be disastrous for borrowers who will have to get credit at greater costs and repay more in higher interest rates imposed by commercial banks.

The managing director of Fairway Auctioneers, Mr Moses Waiswa, cautioned potential borrowers to carefully review mortgage agreements if they don’t want to be caught in a trap and lose high-value goods.

“Banks do not own money. Once you sign a mortgage agreement, know you have been trapped. Just read the adverts and see the rate at which banks are disposing of property,” he said.

What Auctioneers Had to Say

Waiswa of Fairway Auctioneers claimed that he is trapped with real estate that banks have sent him for auction; the majority of the assets belong to people and companies who took out loans before the Covid lockout.

“Usually banks are not cooperative on the time limit, they do not give you time to settle your debt. They have put houses on the market but, unfortunately, there are no people buying the property because there is no money,” he said.

Financial institutions go to auction mortgages after making fruitless attempts to recover money, according to Mr Festus Kateregga of Quick Way Auctioneers and Court Bailiffs, which marketed several properties.

He said, “I am a debt collector. If you mortgage property and default, it is put up for sale and that is where we come in to sell the property. When the bank has a defaulter, they send a file to us to advertise that property so we can recover the money,” he said, adding, “We only come in when the bank has exhausted all the trial processes to recover the money. Mine is to advertise and once I advertise, I advise the borrower to pay within the given days.”

An auctioneer who chose anonymity said, “we are simply given instruction from financial institutions, and those are the instructions we carry out, ours is just to find a buyer”.

Before a sale, it is procedurally required to advertise the properties in the media to draw in the highest bidder.

According to one psychologist, loan defaults and property losses have made borrowers furious and emotionally unbalanced, and as a result, many may need counselling to cope.

What Banks Had to Say

Centenary Bank’s managing director, Mr Fabian Kasi, advises clients who are struggling to service their mortgage to maintain a close relationship with the bank. If you are experiencing cash flow constraints, engage the bank for support, for example, with loan restructures.

Mr Kasi added that to stem the tide of increased property auctions to service loans, creditors should lend cautiously, especially to businesses in sectors that have been challenged by the prevailing economic conditions.

Several officials said the seizure and sale of collaterals is a last resort, which financial institutions would prefer to avoid, but have to execute in desperate measures to recover their money.

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