Affordable housing

Affordable housing
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Affordable housing
SectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Infrastructure
Real Estate
Business Model Description

Upscale affordable housing for low and middle income households in urban and peri-urban areas.

Expected Impact

Offer quality living conditions to low income communities contributing to more equal and sustainable urban planning.

Indicative ReturnDescribes the rate of growth an investment is expected to generate within the IOA. The indicative return is identified for the IOA by establishing its Internal Rate of Return (IRR), Return of Investment (ROI) or Gross Profit Margin (GPM).
20% - 25% (in ROI)
Investment TimeframeDescribes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Short Term (0–5 years)
Market SizeDescribes the value of potential addressable market of the IOA. The market size is identified for the IOA by establishing the value in USD, identifying the Compound Annual Growth Rate (CAGR) or providing a numeric unit critical to the IOA.
Deficit of 2.4 million housing units in Uganda
Direct ImpactDescribes the primary SDG(s) the IOA addresses.
No Poverty (SDG 1) Sustainable Cities and Communities (SDG 11)
Indirect ImpactDescribes the secondary SDG(s) the IOA addresses.
Good health and well-being (SDG 3) Clean water and sanitation (SDG 6) Decent Work and Economic Growth (SDG 8)
Country
Regions
  • Uganda: Central
SectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Infrastructure
IF

Development need: Inadequate infrastructure was one of the 5 key areas ‘problematic to Uganda’s progression’.(II) Accessible and modern infrastructure is crucial for developing other sectors of the economy. Thus the government will strengthen the link between infrastructure development and growth of those sector to attain the synergy effect.(III)

Policy priority: The Third National Development Plan III 2020/21 – 2024/25 prioritizes investment in resilient urbanization with affordable houses and proper waste management as well as transport infrastructure. The aim is to enhance transformation, improve living standards of citizens of Uganda and create workplaces to keep pace with the country's rapid population growth.(III)

SubsectorMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Real Estate
IF.3

Development need: Uganda's urbanization needs more investment to support physical planning and low cost houses with proper services such as waste management and sanitation for middle income earners in urban and peri-urban settlements, and to upgrade informal settlements.(III)

Policy priority: The Strategic Plan 2016-2021 of the Ministry of Finance, Planning and Economic Development recognizes the significant challenge of the housing shortage and rapid population growth.(VI)

IndustriesMost major industry classification systems use sources of revenue as their basis for classifying companies into specific sectors, subsectors and industries. In order to group like companies based on their sustainability-related risks and opportunities, SASB created the Sustainable Industry Classification System® (SICS®) and the classification of sectors, subsectors and industries in the SDG Investor Platform is based on SICS.
Home Builders
IF-HB
Investment Opportunity Area

Affordable housing

Business Model

Upscale affordable housing for low and middle income households in urban and peri-urban areas.

Critical IOA UnitDescribes a complementary market sizing measure exemplifying the opportunities with the IOA.
Deficit of 2.4 million housing units in Uganda

Kampala, Uganda's capital, has a population of almost 1.8 million people. Of them, an estimated 60% lives in unplanned and poorly constructed units.(33) Kampala's housing deficit reached approximately 420,000 units in 2018.(33)

To keep pace with Kampala's urban growth, experts project the city's housing stock needs to increase by an additional 29,000 units each year, and that number is likely to further increase due to Uganda's fast population growth and rapid rates of urbanization.(33)

In total, Uganda's housing deficit is 2.4 million housing units (20), with estimates that 900,000 units throughout the country are substandard and need to be replaced or upgraded.(19)

ROIDescribes an expected return from the IOA investment over its lifetime.
20% - 25%

Companies active in the sector in Uganda noted a return rate of approximately 20%.(39)

Benchmark examples from Africa report internal rates of return (IRR) between 23% and 26%.(18),(38) A similar business model implemented in Kenya reports an average IRR of 16% -17%.(36)

International Housing Solutions, a private equity investor in Africa, achieved an IRR of 25.2% on constructing affordable housing.(37)

TimeframeDescribes the time period in which the IOA will pay-back the invested resources. The estimate is based on asset expected lifetime as the IOA will start generating accumulated positive cash-flows.
Short Term (0–5 years)

According to a case study from Kenya, the developer of affordable housing is paid after 2 years of delivering the project. In this example, it took 18 months to construct a building with 150 flats.(26)

Depending on the size of the project and the utilised business model, the timeframe may be longer.

Capital - Limited Investor Interest
Persistent lack of detailed data on the breadth and character of financial infrastructure investment (3);, lack of affordable long term finance to offer cheap mortgages (3)
Market - Highly Regulated
Uganda has a complicated land acquisition process which affects affordable housing.(31) However, the government is aware of the challenge and has mentioned simplifying the law as one of the policy priorities.(32)
Business - Supply Chain Constraints
Majority (80%) of the land in Uganda is under the customary land tenure system, which might cause problems in claiming it as collateral for securing a mortgage.(35) Construction input prices have increased over the previous years, driving up the costs of housing units.(35)
Sustainable Development Need

The gap between supply and demand for new housing units widens every year.(35) The acute housing shortage reached 2.4 million units countrywide.(20)

In 2018, 48% of Uganda's urban population lived in informal settlements.(1) Those settlements are characterised by high poverty levels and poor living conditions, as well as substandard housing, overcrowding and insufficient access to public services.(4)

In 2019, Uganda's level of urbanization stood at 24.4%.(6) By 2060, it is forecast to reach as much as 60%.(7) 80% of Kampala's population lives in rented units, with the key constraints to housing ownership being low affordability and high costs of mortgages.(35)

Gender & Marginalisation

The most vulnerable group residing in the informal areas are youth, aged between 15 and 35 years. They are often undereducated and underemployed, as well as victims of violence, which substantially affects human capital development.(5)

Expected Development Outcome

Improved living conditions and quality of life, improved livelihoods of populations living in poverty, ameliorated affordability of housing

Decreased inequalities in access to housing for low and middle income families, reduced growth and expansion of informal areas, increased formal settlements and urban planning development

Reduced communicable and non-communicable diseases connected with living in informal settlements

Gender & Marginalisation

Improved living conditions are expected to positively influence youth and contribute to a productive livelihood situation.

Primary SDGs addressed
1 - No Poverty
No Poverty (SDG 1)

1.2.1 Proportion of population living below the national poverty line, by sex and age

1.4.1 Proportion of population living in households with access to basic services

11 - Sustainable Cities and Communities
Sustainable Cities and Communities (SDG 11)

11.1.1 Proportion of urban population living in informal, informal settlements or inadequate housing

11.3.1 Ratio of land consumption rate to population growth rate

Secondary SDGs addressed
3 - Good Health and Well-Being
Good health and well-being (SDG 3)
6 - Clean water and sanitation
Clean water and sanitation (SDG 6)
8 - Decent Work and Economic Growth
Decent Work and Economic Growth (SDG 8)
Directly impacted stakeholders
People
Low and middle income households, people living in informal settlements
Gender inequality and/or marginalization
Youth living in productive environments
Corporates
Construction services providers, construction materials manufacturers, mortgage providers
Indirectly impacted stakeholders
Planet
Reduced environmental impact from informal settlements with limited waste services
Corporates
Businesses emerging in new settlements
Public sector
Government with an opportunity to support communities in a controlled environment
Outcome Risks

There is a risk that a mortgage might be difficult to repay, which will strain the budget for low income families.

Alteration of natural environment in greenfield projects (21)

Waste production due to construction.(21) Contamination of water and increased mud and dust due to construction.(22)

Constructing new housing units, especially state-subsidized, can affect the value of land and buildings in the neighbourhood.(28)

What

Providing affordable housing is likely to have a positive impact because it improves the living conditions, reduces the prices of houses and limits further expansion of informal settlement areas.

Who

Providing affordable housing is likely to have a positive impact because it improves the living conditions, reduces the prices of houses and limits further expansion of informal settlement areas.

Risk

Similar projects have already been implemented in Uganda and the model has proven effective, although real estate data and environmental risks exist.

Impact Thesis

Offer quality living conditions to low income communities contributing to more equal and sustainable urban planning.

Policy Environment

Land Sector Strategy Plan 2013-2023: This plan determines an operational framework for developing land sector reforms imperative to capture and safeguard Uganda’s land tenure system and land users' rights. It also streamlines and modernizes land delivery, and promotes balanced land and natural resources use.(8)

Uganda National Urban Policy: This policy establishes a framework for solving problems related to rapid urbanization. Those include: fast population growth, high levels of urban poverty, poor waste management, high unemployment, ongoing environmental degradation, and poor urban safety and security.(10)

Uganda National Housing Policy: This policy addresses key developmental challenges including: inadequate housing, the housing backlog due to inappropriate construction; and the increasing population. These factors have increased housing demand and contributed to deteriorated housing conditions.(11)

Uganda National Land Policy: This policy describes the current frameworks around land ownership, establishes goals for efficient and sustainable use of land, provides incentives for appropriate and productive use of land, and establishes a new institutional framework for land ownership.(32)

Financial Environment

Financial incentives: Initial allowance and depreciation allowance. Initial allowance – capital deduction of 50% on qualifying plant and machinery. An investor who places depreciable assets in service is eligible for a deduction of 5% on cost of construction straight line method for 20 years.(17)

Fiscal incentives: Double Taxation Agreements (DTA): Investors from countries with active DTAs with Uganda are eligible to withhold tax rates applicable to dividends, interests, management fees and royalties to the amount of 10%, except the United Kingdom, for which the rate is 15%.(17)

Other incentives: The government supports developing affordable housing by placing, emphasizing and/or subsidizing the related infrastructure, such as sewerage, electricity etc.(31)

Regulatory Environment

Although the construction sector is well-regulated and has opportunities for private sector investments, some challenges connected with land tenure remain. However, those are being evaluated by the government and can be expected to be resolved in the near future.(32)

Land Act 1998, Chapter 227 (amended in 2004 and 2010): This Act outlines provisions for the tenure, ownership and management of land, and amends and consolidates the law on tenure, ownership and management of land.(9)

Mortgage Act 2009: This Act provides a framework for creation of mortgages, duties of engaged parties, priority, tacking, consolidation and variation of mortgages, discharge of mortgages and court settlements.(13)

Standard Specifications 2012: These standards regulate architectural, structural and general works, building sanitation and electrical services.(15)

Building Control Regulations Schedules: These schedules specify occupancy classification, design population, parking requirements, load reduction on columns, terrain categories, general classification and design bearing capacities of soil, thickness of non-load bearing walls, etc.(16)

Private Sector

Exim Bank, Mbvoni, National Housing and Construction Company (NHCC), Jomayi Property Consultants, Canaan Sites, Hossana, Heritage Sites, Sema Properties, Zion Construction

Government

Ministry of Lands, Housing and Urban Development, Ministry of Works and Transport, Urban authorities

Multilaterals

African Development Bank (AfDB)

Non-Profit

CDC, KfW, Habitat for Humanity Uganda, Centre for Affordable Housing Finance in Africa (CAHF), US Agency for International Development (USAID), Financial Sector Deepening Uganda (FSDU), Shelter and Human Settlements Alternatives : Ugandan Human Settlements Network (SSA: UHSNET)

country static map
urban
Uganda: Central
The highest deficit of proper housing is seen around large cities, such as Kampala, where important informal settlements are located (1). The most populated districts in the country are Wakiso and Kampala, with populations of approximately 2 million people and 1.5 million people, respectively (30). The central region (mostly the city of Kampala) comprises 54% of the urban population of Uganda (29).
Sector Sources
  • (I) Sachs, J., Schmidt-Traub, G., Kroll, C., Lafortune, G., Fuller, G., Woelm, F. (2020). The Sustainable Development Goals and COVID-19. Sustainable Development Report 2020. Cambridge: Cambridge University Press. (II) Schwab, K. (2016). The Global Competitiveness Report 2015–2016. http://www3.weforum.org/docs/gcr/2015-2016/Global_Competitiveness_Report_2015-2016.pdf (III) National Planning Authority. National Development Plan III (NDPIII) 2020/21 – 2024/25. (IV) Government of Uganda. Uganda Vision 2040. https://consultations.worldbank.org/sites/default/files/materials/consultation-template/materials/vision20204011.pdf (V) Ministry of Works and Transport. Works and Transport Sector Development Plan (WTSDP) 2015/16 – 2019/20. (VI) Ministry of Finance, Planning and Economic Development. Strategic Plan 2016-2021. https://www.finance.go.ug/sites/default/files/Publications/MOFPED%20STRATEGIC%20PLAN%202016_2021%20printed.pdf
IOA Sources
  • (1) World Bank database. (2) Habitat For Humanity. Uganda - The housing need in Uganda. https://www.habitat.org/where-we-build/uganda (3) Kayiira, D. Landscape of housing investments in eastern Africa. http://www.auhf.co.za/wordpress/assets/Day2_08h00_Kayiira_Consultant-Presentation_Eastern-Africa-Investment-Landscape-Presentation.pdf (4) United Nations Human Settlements Programme (UN-Habitat) (2012). Uganda National Urban Profile. https://www.worldurbancampaign.org/sites/default/files/uganda_national_urban_profile.pdf (5) International Organisation for Migration (2017). Poverty and Unemployment Major Causes of Conflict in Ugandan informals – Study. https://uganda.iom.int/publication/poverty-and-unemployment-major-causes-conflict-ugandan-informals-%E2%80%93-study (6) Statista database. (7) Davis, K. (2019). Perceptions and Precarity of the Urban Poor in Kampala, Uganda. https://trace.tennessee.edu/cgi/viewcontent.cgi?article=6837&context=utk_gradthes (8) Ministry of Lands, Housing and Urban Development. Land Sector Strategy Plan 2013 - 2023. https://mlhud.go.ug/wp-content/uploads/2019/09/LSSP-II.pdf (9) Government of Uganda (1998). Land Act 1998, Chapter 227. http://mlhud.go.ug/wp-content/uploads/2019/03/Land-Act-1998-as-amended-CAP-227.pdf (10) Ministry of Lands, Housing and Urban Development (2017). Uganda National Urban Policy. https://mlhud.go.ug/wp-content/uploads/2019/07/National-Urban-Policy-2017-printed-copy.pdf (11) Ministry of Lands, Housing and Urban Development (2016). Uganda National Housing Policy. https://mlhud.go.ug/wp-content/uploads/2015/10/National-Housing-Policy-May-2016.pdf (12) Hashemi, A., Cruickshank, H. and Cheshmehzangi, A. Sustainable low-income housing in Uganda, challenges and opportunities. https://warwick.ac.uk/fac/sci/eng/elith/publications/all_publications/elith-uc10.pdf (13) Government of Uganda (2009). Mortgage Act 2009. https://mlhud.go.ug/wp-content/uploads/2019/03/Mortgage-Act2009.pdf (14) Ministry of Works and Transport (2006). Building Control Regulations 2006. https://www.architects.ug/national-building-code/ (15) Ministry of Works and Transport (2012). Standard Specifications 2012. https://www.architects.ug/national-building-code/ (16) Government of Uganda. Building Control Regulations Schedules. https://www.architects.ug/national-building-code/ (17) Uganda Revenue Authority (2019). A Guide on Tax Incentives / Exemptions available to the Uganda Investors. https://www.ebiz.go.ug/wp-content/uploads/2020/03/TAX_INCENTIVES_GUIDE_FOR_INVESTORS_IN_UGANDA_October_2019.pdf (18) Chilongo, M. (2015). Investment Theme: Access to Housing. https://www.sbs.ox.ac.uk/sites/default/files/2019-01/Impact-theme-Acess-to-Housing.pdf (19) Basiime, F. (2020). Uganda facing 2.4 million housing deficit - report. https://www.monitor.co.ug/uganda/news/national/uganda-facing-2-4-million-housing-deficit-report-2457372 (20) Habitat for Humanity. The housing need in Uganda. https://www.habitat.org/where-we-build/uganda (21) Chukwudi, U.S., Christopher, M.C. and Uche, A. (2017). CONSTRUCTION EXTERNALITIES: A THEORETICAL INSIGHTAND THE NIGERIAN SCENARIO. http://www.eajournals.org/wp-content/uploads/Construction-Externalities-A-Theoretical-Insightand-the-Nigerian-Scenario.pdf (22) Environmental Pollution Centers. Construction Sites Pollution. https://www.environmentalpollutioncenters.org/construction/ (23) Downs, A. (2004). Traffic: Why It’s Getting Worse, What Government Can Do. https://www.brookings.edu/research/traffic-why-its-getting-worse-what-government-can-do/ (24) Ministry of Lands, Housing and Urban Development. About Us. https://mlhud.go.ug/about-us/ (25) Ministry of Works and Transport. Ministry of Works and Transport. https://www.gou.go.ug/ministry/ministry-works-and-transport (26) Shah, S. (2019). Construction financing in Africa’s affordable housing sectors: a critical gap. Testing the assumptions in Kenya’s Affordable Housing Program. Centre for Affordable Housing Finance. http://housingfinanceafrica.org/documents/case-study-16-construction-financing-in-africas-affordable-housing-sectors-testing-the-assumptions-in-kenyas-affordable-housing-program/ (27) Gholipour, H.F.,Nguyen, J. and Reza Farzanegan, M. (2016). Higher property prices linked to income inequality: study. https://theconversation.com/higher-property-prices-linked-to-income-inequality-study-68664 (28) Rossi-Hansberg,E. and Sarte, P.D. (2012). Economics of Housing Externalities. https://www.princeton.edu/~erossi/EHE.pdf (29) Government of Uganda. Maps and Regions. https://www.gou.go.ug/about-uganda/sector/maps-regions (30) Uganda Bureau of Statistics (2016). National Population and Housing Census 2014. Main Report. https://uganda.unfpa.org/sites/default/files/pub-pdf/CENSUS%202014%20Final%20Results_0.pdf (31) Centre for Affordable Housing Finance in Africa. Housing Finance in Uganda. http://housingfinanceafrica.org/countries/uganda/ (32) Ministry of Lands, Housing and Urban Development (2013). The Uganda National Land Policy. http://extwprlegs1.fao.org/docs/pdf/uga163420.pdf (33) Haas, A. and Ngoga, T.H. (2018). Where are Kampala’s missing houses? https://www.theigc.org/blog/kampalas-missing-houses/ (34) Centre for Affordable Housing Finance in Africa (2020) Uganda’s Housing Construction and Housing Rental Activities. http://housingfinanceafrica.org/app/uploads/UGANDA-FINAL-formatted-version-1.pdf (35) Kayiira, D. (2019). Uganda. http://housingfinanceafrica.org/app/uploads/V14-Uganda-profile-kf-3.pdf (36) Kenya Property Developers Association (2018). Affordable Housing in Kenya - Investment cases for developers building affordable homes in Nairobi. http://housingfinanceafrica.org/app/uploads/Kenya-Affordable-Housing-Investment-Cases6.pdf (37) Rust, K. (2016). The Residential Investment Opportunity in Driving Economic Growth. Centre for Affordable Housing Finance in Africa. http://housingfinanceafrica.org/documents/the-residential-investment-opportunity-in-driving-economic-growth/ (38) Shah, S. (2019). Construction financing in Africa’s affordable housing sectors: a critical gap. Testing the assumptions in Kenya’s Affordable Housing Program. Centre for Affordable Housing Finance. http://housingfinanceafrica.org/documents/case-study-16-construction-financing-in-africas-affordable-housing-sectors-testing-the-assumptions-in-kenyas-affordable-housing-program/ (39) UNDP/PwC private sector interviews, 2021.