Parliament angers property dealers with enactment of Landlord and Tenant Bill
Real estate dealers in Uganda were left astonished by the enactment of a new law that banned the payment of rent foreign currencies.
The law that will regulate the relationship between landlords and tenants was passed by parliament last evening amid contention. Paying rents in dollars was the most contentious issue in the bill – for fairly valid reasons from either side of the tenants and landlords.
The real estate developers argue that they borrow money in US Dollars to put up buildings because it is cheaper, at about 10 per cent compared to Uganda shilling loans, which average at 20 per cent. Borrowers have to pay back loans in dollars.
Meanwhile, the traders who earn in Uganda shillings, argue that paying rent in Dollars is expensive because every time the Uganda shillings depreciates, they need more money to buy dollars to pay rent.
At the end of the debate, legislators resolved that all payments should be in the local currency. But Judy Rugasira Kyanda, the executive director of Knight Frank Uganda, the biggest Real Estate dealer by market share in the country, said, “the MPs have destroyed the property market completely.”
Rugasira said she had previously held a lengthy discussion with Kampala Central MP Mohammad Nsereko, but she was equally surprised to see him tow a different line, in the parliamentary debate. Nsereko was the traders’ champion in the whole process of this, arguing their case against rents in dollars.
Rugasira indicated that Politics won over reason. She said they are taking the fight directly to President Museveni, with the hope that the law, turns out like the sugar will, which the president returned to Parliament for review.
Restricting the use of Dollars for charging rent risks Uganda falling out of favour with serious institutional investors who prefer the greenback because it is much more stable and predictable than the local unit, players say. They want the government to strike the balance – leave it to landlords and to tenants to agree on which currency to use.
Last week, the physical infrastructure committee of Parliament, which real estate dealers said was progressive, indicated that rent should be paid in any legally binding currency. In the same week, according to Knight Frank, key dealers which had been held by the uncertainty of the law were sealed.
It particularly announced this week the sale of Metroplex shopping mall to Gateway Delta, a Mauritius firm which promised to sink in $21 million to redevelop the mall. The firm said it expected to create 300 direct jobs.
Rugasira, seemingly speechless, said they were meeting the investors today morning to complete the deal and “we don’t have what to say,” she said.
The law, if the president goes ahead to assent it into an Act, will be a slap in the face to many dealers – from Crane Management Services, the holders of mogul Sudhir Ruparelia’s property to Donville Properties Ltd, to Knight Frank.
Properties marketed in upscale suburbs of Muyenga, Kololo, Naguru and Bugolobi were mostly marketed in US dollars both for sale and rent.
Rugasira said the law is also a blow to low-cost housing dream. The law, she said, has just increased rental rates by 38.9 per cent, ending all thoughts of affordable housing, according to industry calculations.
Last year, at least $100 million was invested in real estate in Uganda, according to Knight Frank. Megaprojects such as the $50 million Arena mall in Nsambya was taking shape – an indicator of confidence in the sector. But all this might be dampened by the law that restricts rent in Dollars.