Hidden investment opportunities in urban real estate?

The real estate industry in Uganda, particularly around Kampala city, has created many tycoons over the last three decades for the obvious reason that it is very lucrative. Think of any tycoon in this town and high chances are that they got their money from property revenue or property trading.

Over the last two decades, Uganda has experienced an unprecedented property boom that has resulted in massive property developments both in commercial and residential areas.

Noticeably, almost all villages in a 30-miles radius around Kampala are now brand new bustling suburbs, teaming with residential homes and townships.

Just 20 years ago, most of these were bushes, farms, typical country villages with little or no urban housing to boast of.

The trading centres that were mere matchbox-and-salt shops 20 years ago are now major business hubs with modern properties and urban amenities.

This avalanche of property development has contributed to financial success through creating employment, investment opportunities and income for so many people and still is. It employs so many people of different vocations; hardware retailers, masons, property brokers and traders, architects and engineers, manufacturers, etc.

The investment opportunities have simply been unprecedented, turning the fortunes for thousands of people.

From an outsider position, it is hard to imagine that the industry still has untapped investment opportunities. But according to industry players and experts, the answer is yes.

Housing deficit

According to Habitat for Humanity, Uganda’s housing deficit stands at 2.4 million housing units, out of which 210,000 units are in urban areas and 1.395 million units in rural areas. An estimated 900,000 units are substandard and in need of replacement or upgrading.

By the above statistics alone, more homes still need to be built and for a country whose population is 70 percent under the age of 30. This trend is not about to slow down.

Constructing houses for rent or sale will continue being big business for many years to come considering that our population growth keeps on the same trajectory. While many investors are already tapping into this opportunity, there are some hidden opportunities to note.

Mizigo or studio apartments

The only reason for this particular investment is because of the crazy demand for them. A studio apartment, also known as muzigo or bachelor apartment, is a small home (mostly rental) in which the normal functions of a full home are combined into a single room. It is a bedroom that also works as a sitting room and kitchen all at the same time, with a separate bathroom, usually detached. It usually comes at a great bargain and favors most young people starting out in the employment world. The rent usually starts at as low as Shs 100,000 monthly but can go up to Shs1m depending on the neighbourhood and size of the apartment. 

Property expert Cissy Namaganda believes that in a country with massive unemployment and underemployment, investing in studio apartments is a very cheap and smart investment because of the sheer number of young, underemployed adults looking for accommodation.

“Most of these young people cannot afford anything more than a studio apartment because they make so little. And because they make up the biggest portion of the workforce, it is a wise to invest in housing suited for them,” she advises.

Vacation rentals

These are short-stay homes that are fully furnished and fancy enough for people on vacation to comfortably live in them for the duration of their vacation. They are designed to feel like home away from home and families or couples tend to love the privacy they provide in comparison to hotels.

Namaganda says, “When people say they have gone to Dubai to rest, usually the places they choose to rest from are vacation rentals. These are usually registered on AirBnB so that people on the other end of the world can book them online. But even without AirBnB, these homes can be advertised with property brokers and rented out for short stays.”

Office condominiums

Property experts believe it is time for investors to think of dealing in office condos. Alex Mabanga, a property broker in Kitende off Entebbe road says that clients looking for office space to own is on the increase over the last two years.

“After two years of working from home because of the covid-19 lockdowns, most people seem to find driving to the central business district for work cumbersome. Many prefer to work from home, or at least close to home. And because many spent two years working from home and not paying office rent, many are hell-bent on keeping it that way; they are looking to own their own offices. And that is where office condos come in,” says Mabanga.

Office condos are work stations in a property complex like a mall or an office building that are sold to different companies or individuals instead of renting them out.

While each office space is owned by the company that sits in it, the common areas like the reception or the gardens or the rooftop area are co-owned by all of the tenants, and typically maintained by an elected board.

Investors might do themselves a favour by starting to think of building office condos deep in city suburbs closer to people’s residences. There are signs that point to the fact that people are looking for rent-to-own office condos in their neighborhoods to save on fuel and time it takes to drive to town.

Interior design companies

One of the fields that are still very virgin in Uganda’s real estate market is interior design. While construction of business and residential property has been massive over the last two decade, Interior design has not grown at the same rate. Experts believe there is still a big gap to fill in this field because not many creatives have taken advantage of this opportunity.

“People build great homes only for them to be underwhelmed by the sheer boredom they find themselves in. Everything from the colour of the walls to the sofas to the curtains to the lights need professional to make them interesting and exciting. Making the interior of a house to feel great needs the skills of a skilled interior designer,” Namaganda says.

Homes for the elderly

There are people, especially from the diaspora, that want to return home for retirement but have nowhere appropriate to live. There are others whose children have died or whose children have gone to the diaspora, leaving them with no family to care for them. There are senior citizens that have medical conditions that require constant medical assessment without necessarily being admitted in hospital. All these people present an opportunity for investment according to Namaganda.

“We have to come to terms with the fact that the traditional way we have always looked after the elderly is coming to an end with the modern era. And we must build homes for the elderly designed to make them live comfortable lives where they can be cared for by different kinds of professionals,” Namaganda says.

A group of homes hidden in a quiet village away from busy city streets would be ideal for that purpose. Each home house an elderly couple or one person, all cleaning, all meals, all medical care is done centrally, paid for by their retirement benefits, government, or the children.

Parking buildings

For years, the commonest parking option in Kampala and all the other major cities in the country has been street parking. Street parking is not only needlessly expensive, it is unsafe from road accidents, thieves and sun damage to cars. That is why parking towers are such a great need for motorists. They are the future of city parking, but Kampala has only one dedicated parking building.

Kampala experiences heavy traffic daily because there is no train or bus system of mass transport. People rush to buy cars as soon as possible. While this problem is such a menace, it is only the beginning. Uganda’s population is 70 percent under the age of 30 and this means that in ten years, traffic jams will be unbearable. Street parking will most likely be abolished to create space for more motorable lanes. With that projection comes the urgent need for parking buildings.

Warehouses

As Uganda’s economy matures to include more and more importers, exporters and big producers, property experts are starting to see a trend where warehouses for rent are on demand. James Okello is a property broker in Banda and Nakawa and he believes that investing warehouses is a worthy investment.

“Not every exporter or importer is well off enough to have their own warehouse. Many are young and starting out, and they want safe places for their commodities. There are also those who have to leave the country for work and they come seeking warehouses in which they can keep their things for two or three years,” he says.

Land

Investing in real estate is not a new path to financial success. It is a well-worn path and it is so well worn because it is such an effective way to make a great deal of money in a relatively short period of time. But you have to be a forward thinker to make any serious money in the buying and selling of real estate. Buying empty plots close to developed areas is a worth investment though they come at a huge cost.

For more affordable options, driving an hour out of town always gets you larger chunks at a good price. Just keep in mind to purchase a plot is free of encumbrances, has undisputed title deed, local approvals and other necessary paper work in order.

Urban property investments meet all of the criteria for sound real estate investing. There is a good rental market in an urban area, there are a lot of people in need of housing and the market is stable. Demand is most likely to decrease as more people migrate to urban areas in search of a better life.

Location

According to the old real estate saying, “The only three things that matter in real estate are location, location and location.” The fact is that a 10 bedroom, eight bath home with cathedral ceilings and a swimming pool that is sitting next to a garbage dump is nearly worthless.

On the other hand a little one bedroom, one bath house in an up and coming area is worth a small fortune. So you can see that the location is of the utmost importance when you are considering a piece of real estate to invest in.