Government has bowed to pressure from several real estate owners and agreed to amend the Landlords-Tenants Bill, 2018 to allow landlords to charge rent in dollars.
On April 9, Cabinet passed the Bill, which, among other clauses, put a permanent freeze on charging rent in foreign currency. However, several landlords under the Uganda Developers Association protested the move, arguing that banning it would be catastrophic to economic growth.
However, during last week’s meeting, Cabinet agreed to lift the ban on charging rent in dollars, however, cautioning that landlords, before taking the decision, must reach consensus with the tenant, basing on the prevailing exchange rate. Cabinet tasked Housing minister Chris Baryomunsi to incorporate views of all stakeholders before the Bill is tabled in Parliament.
When contacted, Dr Baryomunsi confirmed the Cabinet decision and the whole idea is based on the need to achieve harmony between tenants and landlords. The minister said more amendments will be handled at committee level in Parliament when several groups make submissions on the Bill.
In its current form, the proposed Landlord and Tenant Act, 2018 bars a landlord from increasing rent beyond 10% per year or such other percentage as may be prescribed by the minister for Housing.
The legislation was drafted after a long outcry by the traders under their umbrella body, Kampala City Traders Association (KACITA), that landlords were arbitrarily increasing rent charges on short notice and without consulting them.
However, several real estate players and public policy have lambasted the move, saying it spells doom for the real estate industry and scares away foreign investors.
Hamis Kiggundu, a property tycoon, said the rent is determined by a number of factors. For example, he said, building a commercial building requires getting a loan from a bank and the interest rates are very high. “In this case the rent is determined by such factors,” he said.
Muzamiru Kibeedi, a lawyer said: ‘The real estate sector is very central to the health of our economy. Commercial banks and other financial institutions heavily rely on it to secure the loans they lend to their customers for development. It is one of the least risky areas a private individual can invest in and make a reasonable return on the investment.”
“The bill in its current form removes fixation of rent from the open market forces and subjects it to the whims of politics and politicians as symbolized by the Minister responsible for Housing,” he added.
“Above all, the proposed law does not indicate that the tenants who will occupy the premises whose rent is controlled will likewise have a legal obligation to sell their goods and services at likewise controlled prices. What is good for the goose should also be good for the gander. But clearly, the rent control measures are unfair and do not meet the constitutional standard of equal treatment of all people.”
This is not the first time government is trying to regulate the sector.
In 1972 when Idi Amin expelled Asians, he gave powers to the minister of Housing to determine the rent chargeable in respect of the departed Asians properties.
And as expected, it was below the prevailing market rates. So, the demand for the houses shot up and could not be met by available houses on the market.
A black market for rental houses emerged. The persons with the “right connections” with state power would get houses allocated to them from the Custodian Board at the controlled rent and sublet them out at commercial open market rates.
The Bill that is expected to be tabled this month seeks to promote access to adequate housing and other rentable premises as well as create a mechanism for proper functioning of rental market for both residential and commercial premises.