MAKERERE UNIVERSITY COLLEGE OF ENGINEERING, DESIGN, ART AND TECHNOLOGY SCHOOL OF BUILT ENVIRONMENT DEPARTMENT OF CONSTRUCTION ECONOMICS AND MANAGEMENT COURSE: BACHELOR OF SCIENCE IN QUANTITY SURVEYING COURSE UNIT: HOUSING DEVELOPMENT AND MANAGEMENT BY LECTURER WESONGA RACHEAL YEAR: YEAR III GROUP 2 REGISTRATON STUDENT NUMBER NUMBER SSEKAJJA ABDULSWAMADU BSQS 19/U/0111 1900700111 AKANKUNDA MAXIM BSQS 19/ U/0580 1900700580 RUTANGYE JOSEPHINE BSQS 19/U[/8178/PS 1900708178 KEMIGISA MARTHA ALUM V BSQS 19/U/0120 1900700120 TUHAISE BRAIN BSQS 19/U/8271/PS 1900708271 NABAWENDA JOAN BSQS 19/U/0561 1900700561 NAKIMULI JULIAN CAROL BSQS 19/U/0117 1900700117 AHEEBWA GLORIA BSQS 19/U/0124 1900700124 ANGWEN ANGELLA BSQS 19/U/0573 1900700573 TUMWESIGYE ALLAN BSQS 19/U/00554 1900700554 NAME COURSE Table of Contents 1 INTRODUCTION ..................................................................................................................................... 4 2 PROPERTY/REAL ESTATE DEVELOPMENT ............................................................................................. 5 3 4 2.1 Real Estate Development in Kampala ........................................................................................... 5 2.2 Real Estate Development Process ................................................................................................ 6 REAL PROPERTY MARKET ...................................................................................................................... 6 3.1 The meaning of real property market........................................................................................... 7 3.2 Characteristics of Real Property market ....................................................................................... 7 SECTOR TRENDS OF REAL ESTATE DEVELOPMENT (CASE STUDY, KAMPALA) ...................................... 8 4.1 RESIDENTIAL SECTOR .................................................................................................................. 10 4.1.1 RENTAL YIELDS IN KAMPALA ............................................................................................... 11 4.1.2 Key drivers in residential market ........................................................................................ 11 4.1.3 Challenges in the Residential Market ................................................................................. 12 4.2 COMMERCIAL SECTOR ................................................................................................................ 13 4.2.1 Drivers of the Commercial Sector in Kampala .................................................................... 13 4.2.2 Challenges Facing the Sector .............................................................................................. 13 5 TRANSPORT SECTOR AND AMMENITIES ............................................................................................. 14 6 REAL ESTATE FINANCING .................................................................................................................... 14 7 8 9 6.1 Mortgage financing ..................................................................................................................... 14 6.2 Mortgage Pricing ......................................................................................................................... 15 6.3 Mortgage Insurance .................................................................................................................... 15 DEVELOPMENT PROCESS OF REAL ESTATE DEVELOPMENT ............................................................... 15 7.1 The Pre-Development Stage ....................................................................................................... 15 7.2 Design and Costing...................................................................................................................... 17 7.3 Tenders and contract award ....................................................................................................... 18 7.4 The Construction Stage ............................................................................................................... 18 7.5 Marketing (let/dispose) .............................................................................................................. 18 ENTERING THE PROCESS ..................................................................................................................... 19 8.1 Capital ......................................................................................................................................... 19 8.2 Land ............................................................................................................................................. 20 8.3 Knowledge................................................................................................................................... 21 8.4 Tenant ......................................................................................................................................... 22 COSTS INVOLVED IN REAL ESTATE DEVELOPMENT ............................................................................ 23 10 PLAYERS IN KAMPALA’S REAL ESTATE MARKET .............................................................................. 25 10.1 Real estate developers ................................................................................................................ 25 10.2 Real Estate Broker ....................................................................................................................... 25 10.3 Private individuals ....................................................................................................................... 25 10.4 Property Manager ....................................................................................................................... 25 10.5 Tenants........................................................................................................................................ 26 10.6 Real estate companies ................................................................................................................ 26 10.7 Construction companies ............................................................................................................. 26 11 REFERENCES .................................................................................................................................... 28 1 INTRODUCTION Real estate development which may also be referred to as property development is a business process, encompassing activities that range from the renovation and re-lease of existing buildings to the purchase of raw land and the sale of developed land to others. Real estate development involves three major parties, the consumer or the client, the production or development group, and the public infrastructure group (Graaskamp, 1992). A real estate developer improves things, in this context our concentration lies in raw undeveloped land and buildings to create value in the interest of selling it at a handsome price. “The reality is that a real estate developer cannot make money without first creating value.” (Peca, 2009). Stephen P. Peca goes on to elucidate that creativity and originality defines the first fundamental aspect of the real estate development concept, the other is the enterprise or the business aspect. In a lay man’s language, money i.e., profit hold be realized after the sale of the enhanced property. Since a business possesses income, expenses, revenue taxes and employees, it requires active and aggressive management. Kampala the capital city of Uganda covers a total area of 72.8 square miles and had an estimate population of 1.6 million in 2019 (Micheal, 2019). The city has five divisions i.e., Central, Nakawa, Makindye, Rubaga and Kawempe. In Kampala the real Estate Development concept has been appreciated by a number of business country men and women causing the industry to observe gradual but steady growth. Knight Frank Uganda Ltd, LUBA Properties, Spectrum Real Estate Solutions and Property Management Uganda, Sema Properties, Zion Estates, Jomayi Property Consultants among others are some of the real estate developers in Kampala. Some of the factors responsible for the observation include the rise in demand for the property, improving investor confidence in terms of finances mainly and the steady population growth of 3.2% per annum. Kampala, the capital and largest city of Uganda has the country’s most expensive property. Specifically examining housing, the average price of two- and three-bedroom apartments in prime residential areas stood at US$ 280,000 and US$ 325,000 respectively in 2019. Apartments in high end areas like Kololo, Nakasero and Bugolobi can go as high as US$ 2,000 per square meter. In the upper middle-income areas of Naguru, Mbuya, Luzira, Muyenga, Lubowa and Ntinda, the average price of apartments was US$ 1,160 per square meter. The final examination was of the middle-income suburbs of Bukoto, Kiwatule, Kira, Naalya, Namugongo, Buziga and Bunga whose apartments sell for an average price of US$ 900 per square meter. 2 PROPERTY/REAL ESTATE DEVELOPMENT Property involves a system of rights that give people legal control of valuable things, and also refers to the valuable things themselves. (Powell, Richard R, 2009) Property development is a process that involves changing or intensifying the use of land to produce buildings for occupation. It is not buying and selling of land for a profit. Land is only one of the raw materials used while others can be; infrastructure, building materials, labour, finance and professional development Real estate is a form of real property. It is property consisting of land and the buildings on it, along with its natural resources such as crops, minerals or water. Real estate is the land along with any permanent improvements attached to the land, whether natural or man-made. (Chen James, 2019) Real estate differs from personal property, (things that are not permanently attached to the land such as vehicles, boats, jewelry). Types of real estate: residential real estate, commercial and industrial real estate. Real estate development is a business process, encompassing activities that range from the renovation and re-lease of existing buildings to purchase of raw land and the sale of developed land or parcels to others. Real estate developers are the people and companies who coordinate all of these activities, converting ideas from paper to real property. (Peiser & Frej, 2003) Real estate development does not necessarily begin with a site, it begins with an idea. Real estate development is a highly creative endeavor. (Peca, Stephen P.) 2.1 Real Estate Development in Kampala It is a relatively new investment opportunity that has enabled people to purchase plots of land and construct homes in peri-urban areas of Kampala. Knight Frank data indicated in the East African Newspaper that 161 new residential apartments are currently under construction and are scheduled for completion within 18 months. The headlines also defined that Uganda’s real estate industry was exhibiting some resilience during the first six months of 2021, in spite of the pandemic lockdown measures. This information was availed on Tuesday August 17th, 2021. The different real estates in Kampala are; Knight Frank Uganda ltd, Spectrum Real Estate Solutions and Property Management Uganda, Sema Properties Limited, Property Agent 175, Honest Estate Developers, Comfort Homes Uganda and many others. 2.2 Real Estate Development Process This process involves three major groups; consumer group, a production group and a public infrastructure group. Each group benefits from cooperation and a full understanding of the values, short and long-term objectives of the real estate. (Graaskamp, James A.) The process also involves the combination of various inputs in order to achieve an output or product. According to James, each real estate project is unique and the development process is so much a creature of industrial production process that society has a new opportunity with each major project to negotiate, debate and reconsider the basic issues of an enterprise economy that is; who pays, who benefits, who risks and who has standing to participate in the decision process. The development is finite and investment returns cannot begin until the process is complete. The process is complex and often takes a considerable time period. The development of real estate involves quite a number of professions including: architects, engineers, planners, lawyers, bankers, public officials and construction traders. Each team member plays an integral part of the real estate product of delivery process. The real estate developer is the one who oversees this process and coordinates the information generated by each project participant while the real estate investor is the one who purchases the already established property after evaluation of the real estate market in order to choose what property is best for generating money. Real Estate Development is the process of creating value by making tangible improvements to real property. The Development ranges from land speculation and new construction to the renovation of existing building. The process comprises of basic stages which are; Pre-development, Planning and Design, Construction and Marketing. 3 REAL PROPERTY MARKET Modern economies are often referred to as ‘’exchange economies’’. Instead of people producing directly for their own wants, they specialize in production in order to increase total input. Thus, both factors of production and final products are exchanged. Exchanges take place because both buyers and sellers benefit from the products. To effect changes, buyers and sellers must be put in touch with one another and therefore we can define market as any arrangement by which buyers and sellers are brought together to fix a price at which goods can be exchanged. 3.1 The meaning of real property market Real property refers to a particular type of good- land or any other resources embodied in land. They are physically immovable and are also referred to as immovable property. Although land resources are not movable, property can be owned by some person or institution. Moreover, exchanges take place. Thus, real property market is simply the arrangement by which buyers and sellers of virgin land, agricultural estates, industrial buildings, offices, shops and houses are brought together to determine a price at which the particular property can be exchanged. Sometimes the market is formal (for example auctions advertised nationally) or informal (for example introductions by estate agents, deals between principals). Indeed, it is not possible to distinguish the means by which people are informed from the market. Much real property is advertised in journals, newspapers, all of which can therefore be said to be part of the market. In other words, the real property market is an abstract term exaggerating all transactions in real property throughout the country. 3.2 Characteristics of Real Property market a) Market forces and players In property market, market forces are based on the economic environment when there is a high demand of property in that place it will affect the price. For example, Hermie Homes Kyanja the prices of the property have been rising yearly because of high demand and all investors take the opportunity to make more investment in Hermie Homes. b) Not standardized products In the property market, not standardized means property has unique characteristics which are exactly not the same. For example, the design of building for a double terraces house is not exactly the same because if we do an inspection for that property, we can see some defects or maybe the owner had upgraded their house. This factor affects the price of the property. c) Involvement of special requirements There are so many legal issues that people have to look out for when buying and selling a property in real estate. Firstly, the Sale and Purchase Agreement (SPA) is a contract which embodies the relevant terms and conditions of the property transactions. Prior to the execution of the SPA, parties may execute a pre contract documents such as State/ Association Purchase Agreement, General Purchase Agreement and others. This greatly affects the transfer of real estate. d) Estate agent’s services are required in many situations Real estate agents are licensed to help sellers sell and buyers buy real estate and are generally licensed to operate, negotiate and arrange sale under the supervision of real estate broker. Negotiating and arranging sales can mean showing property, listing a property, filling in contracts, listing agreements and purchase contracts and other duties. e) Fixed location of products In property market, the property cannot be moved and it is fixed. Location is the most important thing that we have to consider for. Land is a finite commodity, areas that are highly developed and are bound from large amounts of additional growth tend to have higher prices than areas that are less developed. So, when we choose the best location to make an investment it will tend be a high profit. 4 SECTOR TRENDS OF REAL ESTATE DEVELOPMENT (CASE STUDY, KAMPALA) Kampala, the capital city of Uganda as well as the administrative and economic center is located in the central part of Uganda approximately 8km from the northern shores of Lake Victoria and approximately 45km north of the equator. It is characterized by high standards of living (expensive housings and land), shortage of housings, and congestion among other associated with the rapid urban population growth that cannot be met by the existing housing delivery system. Recent reports show that, Uganda is suffering from an affordable housing crisis. Some real estate investors may find this hard to believe. Still, there is no question that many are struggling. This presents some great opportunities for investors to both generate great incomes. Kampala is divided into 5 divisions namely Central division, Kawempe Division, Nakawa Division, Rubaga Division and Makindye Division. a) Central division consists of areas such as Kampala CBD, Nakasero, Kololo and Kisenyi, these are high income areas of Kampala. b) Nakawa division which has neighbourhoods such as Nakawa, Bugolobi, Luzira and Ntinda mostly the upper middle-income areas. c) Makindye division with areas such as Muyenga, Munyunyu, Kibagalagala and Buziga which are mid to upper middle-income areas. d) Kawempe division consisting of Bwaise, Mulago, Kawempe and Kazo among others which are mid to low-income areas. e) Rubaga division consisting of Rubaga, Mengo and Kasubi and is the home to the Kabaka it is a middle to low-income areas. TRENDS IN THE KAMPALA REAL ESTATE MARKET a) Conversion of residential building to offices Due to the low supply of office space, congestion in the CBD and inadequate parking, corporates are increasingly taking up space in residential zones and in units and using them for office spaces b) Infrastructural developments The government has invested in infrastructural developments which has led to development of new residential areas. The Northern Bypass has for instance led to the development of Naalya and the Kampala Entebbe Highway is expected to lead to developments of Suburbs in the areas it will traverse including Lubowa and Munyonyo. c) Increased off-plan Sales The market initially a purely cash market is witnessing an increase in off plan sales especially in the middle-class market which has high demand, is relatively lower priced and has high demand. d) Fractional sale of offices and sale of semi fitted office spaces Fractional sale of office spaces in Kampala is in its nascent stages as developers seek to exit commercial buildings faster. However, the real estate industry encompasses a number of sectors including the housing sector (residential, commercial and retail sectors), transport sector (roads, railways among others), industrial and land sector to some extent. 4.1 RESIDENTIAL SECTOR In general, the residential sector in Kampala is undergoing development with most of the huge developments being less than 5years old. According to the Ministry of Lands, Housing and Urban Development, Uganda’s housing deficit stands at 2.4 million housing units largely concentrated in the low to mid income segment with Kampala having the bulk of this deficit, with the city in need of 210,000 houses. The residential market in Kampala is classified broadly into high income, upper middle income, middle income and affordable housing. The upper income market consists of areas closest to Kampala such as Nakasero, Kololo and parts of Bugolobi. Initially, they were characterized by colonial style marionettes and bungalows which are being replaced with high end furnished apartments attracting rates of between USD 2000 – USD 4000 per month. They serve the expatriate population in Kampala and the high-net-worth individuals. The upper middle-income areas constitute neighboring zones of high-income areas and have grown due to improved infrastructure and expansion of the high-income areas characterized by stand-alone houses in gated compounds with a few apartments being erected. These include areas of Mbuya, Luzira, Muyenga, Ntinda, Naguru and Nagira serving high net worth individuals, corporates and military personnel. House prices range from USD 160,000 – USD 450,000. The middle-income areas include Kampala suburbs of Nalya, Kira, Namugongo and Kintintale with a high demand for apartments. With this, large quantities of apartments are being developed boosted by improved infrastructure in the areas including the Northern Bypass. For Apartments, the ranges from UGX 87.5M to USD 500M (USD 24,360 to USD 138,889). A one-bedroom affordable housing unit is typically offered for UGX 47 million (US$ 12,700) to UGX 85 million (US$ 23,000). Two- and three-bedroom units are priced at UGX 150 million (US$ 40,500) and UGX 200 million (US$ 54,000), respectively as published by the Uganda Bureau of Statistics in 2019. 4.1.1 RENTAL YIELDS IN KAMPALA Region Suburbs High-end areas Kololo, Nakasero, Bugolobi Upper middle- Naguru, Mbuya, Luzira, Muyenga, income areas Lubowa, and Natinda Middle-income Bukoto, Kiwatule, Kira, Naalya, areas Namugongo, Buziga, and Bunga Average Rental Occupancy Yields Rate 6.1% 83.9% 7.4% 84.9% 5.9% 88.8% 6.8% 87.5% Source: Cytonn Report Table 1: Showing rental yields in Kampala 4.1.2 Key drivers in residential market a) High population growth rate and urbanization rate Uganda has a high population growth rate of 3.2% which is higher in cities at 4.3% and a high urbanization rate of 5.2% creating demand for housing units especially in urban areas. b) Increased multinational operations High demand for high end residential units in the technology and financial services sector following the discovery of oil. c) Increasing disposable income Driven by an increase in GDP which has on average grown by 5.1% per annum in the last five years hence increasing the population’s capacity to demand for housing. d) Improved infrastructure The government has improved trunk infrastructure especially roads in the suburbs which have opened up the areas for development. They include Naalya, Namugongo area due to the Northern Bypass. 4.1.3 Challenges in the Residential Market a) Inadequate funding There is very little off taker finance in the Kampala Market hence buyers have to finance using their savings. The problem is compounded by the fact that most sales transactions are cash payments with clearance periods of between 1-6months hence little time to fundraise. Mortgage activity is also subdued. b) High cost of capital Uganda is currently experiencing a high interest rate environment making it expensive to borrow to construct or buy houses. c) Exit of some multinationals This is brought by the delay of the government in issuing of trading licenses hence reducing the demand for prime property. d) High land construction costs High costs of construction inputs, high costs of transportation from ports and high land costs in some suburbs such as Nakasero and Kololo raising development costs reducing the attractiveness and affordability of the housing market. e) Culture Ugandans prefer living in large palatial homes which they cannot afford hence affecting the uptake of apartments which are mainly bought for investment, this culture is however changing as people seek affordability and convenience. 4.2 COMMERCIAL SECTOR The commercial sector in Kampala is fairly nascent. The city has few commercial buildings most of them located in Nakasero, Kololo and few very in the outskirts in places like Bugolobi, Naguru and Ntinda. Most of the buildings are grade B, with very few Grade A offices. The city has as shortage of parking spaces and is congested leading to some players taking up residential blocks in the prime suburbs and converting them to offices with prime rents going to as high as 18 dollars per square. Main occupiers of commercial offices are the Government workers and service providers. Commercial buildings in Kampala are classified into three categories namely Grade A, B and C. Grade A consists of new office buildings in prime locations not less than 120,000 square feet and with ample natural lighting, pleasant views, prestigious finishing and on-site undercover parking. Grade B consists of buildings with a total ranging from 70,000 to 120,000 square feet having good (but lower than grade A) technical services and ample parking space. Grade C consists of buildings of any size, usually older and in need of renovation, lacking lobbies and may not have on-site parking space. 4.2.1 Drivers of the Commercial Sector in Kampala a) Government bodies and parastatals take up the largest amount of office space in the city. b) Financial services and technology sectors that has been picking up has been a major demand driver for offices. c) The oil industry led to the commencement of operations by several multinationals in Uganda increasing demand for commercial offices. d) Multinationals and NGO’s also take up considerable amounts of space in Kampala. 4.2.2 Challenges Facing the Sector a) Inadequate financing and high costs of borrowing for development. b) The oil sector’s failure to pick up operations has resulted in the exit of some players and hence increased vacancies. c) Competition from residential housing converted to office spaces which have more parking and are not in congested areas. 5 TRANSPORT SECTOR AND AMMENITIES Kampala has grown at a faster rate without proportionate growth in infrastructure resulting into congestion coupled by frequent and long traffic jams. The city is served by highways including Entebbe Road (linking Kampala to Entebbe International Airport), Jinja road, Bombo and Ggaba roads, Lugogo and the northern Bypass (linking it to various towns in Uganda). Roads within the high-end estates are well tarmacked whereas those in the middle-income areas most roads are paved with a few tarmacked roads. Electricity to the city is supplied by the Uganda Electricity Distribution Company who have subleased to UMEME (private company) with a fairly strong and regular and power outages are not common. Water is distributed by the Uganda National Water and Sewerage Corporation and most of the areas in Kampala are connected to the main sewer network. There are mainly four stages involved in the real estate development and they include the predevelopment stage, planning and design, the actual construction and also marketing stage. (Reed, 2008) 6 REAL ESTATE FINANCING The commercial real estate sector worldwide is increasingly dominated by institutional investors which lays a challenge for the private real estate investments. 6.1 Mortgage financing Unlike developed countries that use stocks and bonds, financing of real estate property in Uganda’s real estate is predominantly financed through mortgage financing. Mortgage financing is a loan secured by collateral of some specified real estate property that the borrower is obliged to pay back with predetermined set of installments. (Bienert & Brunauer, 2007) The loan is usually for the purchase or construction of housing estates by individuals or companies. Ugandans have realized that with their ever-increasing rental costs, it would be more beneficial to acquire a mortgage and acquire property. The most common types of mortgages are fixed rate mortgages and adjustable-rate mortgages. Fixed mortgages are those where the creditor or investor assumes the interest risk while there is typically no repayment penalty for the borrower whereas adjustable-rate mortgages are interest only mortgages. Mortgage financing has a number of importance and among include; a) Improves the operation of the housing market and the economy by directly facilitating transactions and indirectly improving the environment in which the transactions take place. b) Mortgage finance makes it possible for people to acquire affordable housing as they have the option to own the houses and pay for them in affordable installments over time. c) Creates employment directly and indirectly particularly to the construction industry and indirectly to other sectors. 6.2 Mortgage Pricing Important to note that mortgage prices are determined by real interest rates and risk factors specific to mortgage instruments. They can also be determined basing on inflation rates, nominal rates on one hand and housing prices on another. Mortgage interest rates usually determine the affordability alongside the maturity. 6.3 Mortgage Insurance Mortgage insurance is a specialist form of credit insurance which provides protection to the lender. In the event of the borrower defaulting on their loan and the property being taken into possession and sold but not at a price sufficient to cover the outstanding debt and costs, then the insurance policy pays out the lender. 7 7.1 DEVELOPMENT PROCESS OF REAL ESTATE DEVELOPMENT The Pre-Development Stage This entails all activities carried out before the actual construction works are carried out. This stage is very important because it carries the greatest and most varied risks. Some of the processes entailed in this stage include the following; a) Identification of the goals and objectives. This stage normally depends on the client/developer who may be a public organisation (government) or a private individual. For a private individual, the motive is the profit that he/she will realise from the development and for the government, whether the development will not only recover the costs but also benefit the society. b) Evaluation This stage involves advice of the developer’s professional team and also the decision by the developer to bear all the development risks. It includes market research both in general and specific terms, establishment the preliminary cost of development and ensuring that it is reasonable, the estimated profit to be generated in case of a private developer and also the value of the site being developed. Planning permission is also obtained where you have to get consent from the planning authority. The physical planning act stipulates that every person requiring consent shall make application to the planning authority in such form and such manner as may be prescribed and shall include such plans and particulars as are necessary to indicate the intention of the applicant. This requires filling a layout plan showing the proposed development hence requiring the appointment of an architect. c) Land acquisition or securing rights to purchase land Development is initiated when a site to develop has been got and is actually suitable for the desired use. The demand for a particular use leads to a search for a suitable site. (Reed, 2008). The initiator has to conduct a market survey so as to establish the potential site for the development where the supply will meet the demand requirements. The following are done during this stage; i. Due diligence This is done to ascertain the suitability of the land for the intended development taken prior to ensure that there are no obstacles that may prevent the development from being approved by the council such as site contamination, easements and registered restrictive covenants on land. ii. Legal permissions All legal issues concerning the site must be assessed including ownership, existing planning permission and the rights of way, light or support. iii. Ground investigations This is done to assess the capability of the site to accommodate the proposed development. The following are assessed; General nature of the soils (soil investigation). This is mainly done to determine whether the ground is strong enough to bear the structure. iv. Accessibility of the site This is done to see whether there is a route to site, what is its condition if any exists. v. A survey of the services through or close to the site. These services may include electricity lines, sewer lines, water pipes and telephone lines. This is mainly done to ascertain their capacity to serve the proposed development and if they are absent, the costs to be incurred to extend them to site must be put into consideration by the developer. vi. Finance This involves obtaining lending pre- approval which will require you to submit your detailed feasibility study to your lenders. 7.2 Design and Costing In this stage, the developer must have detailed knowledge of what design is required if the likely occupier is known or has already been secured. This implies that the developer may need to work on a number of initial ideas with the agents and the professional team before establishing a design brief for the project. Design works are always kept to the minimum to keep costs down prior to the commitment of the developer. However, there should be enough detail to enable the quantity surveyor to prepare an initial cost estimate. (Reed, 2008). The following are covered in this stage; a) The developer needs an architect and tells him about his basic requirements b) The architect then produces preliminary drawings for consideration by the developer. Estimates of the project costs are generated from these drawings. c) The developer gives feedback to the architect after reviewing the drawings and proceeds with the working drawings. d) Drawings are then taken for approval by local authorities and other certain departments. One needs on average 3 to 4 copies for; the planning department, land, building department, health inspectory department and in some cases NEMA. e) Final Bills of Quantities are created by the quantity surveyor, specifications are also made and the conditions of contract are generated. 7.3 Tenders and contract award In this stage, the following process is followed; a) The development job is advertised b) The design documents are picked by various interested contractors c) Contractors submit bids/quotations d) The quantity surveyor and civil engineer examine tenders and select a competent contractor. e) The quantity surveyor and civil engineer submit a report to the developer through an architect for the successful contractor. f) The developer and contractor sign an agreement in the presence of the consultants. 7.4 The Construction Stage In this stage, the contractors prepare a work programme and starts work on site. The aim throughout this stage is to ensure that development is completed within the time and budget set out in the evaluation without compromising quality. This implies that the quantity surveyor must exercise control during construction to ensure that cost is not exceeded without authority. 7.5 Marketing (let/dispose) This is always the last phase in the development process but must be at the fore front of the developer’s thoughts from the initiation of the scheme. In some cases, the occupier may have been secured at the start or during the development process. The development’s success will depend on the ability to secure a willing occupier at the estimated rent or price, as well as within the period originally forecast in the evaluation. (Institute, 2001) At the start of the process, the developer has to decide whether the investment is to be sold to realise profit or to be provided for rent. This decision depends on the motive of the developer and also the prevailing property investment market conditions at the time. After the occupier has been got, the developer should maintain contact with the occupier, even though no direct landlord-tenant relationship exists. This is mainly for purposes of making improvements in the subsequent developments. 8 ENTERING THE PROCESS Different developers come to the sector of development through different ways. The process of entering the field of development differs for the different developers may be through; Working and operating with a small growing company. This gives a chance to observe and execute everything ongoing in the company. Operating and working as a project manager for bigger companies. This is by offering responsibility to the developer for one given project under the company. To commence with the process of entering the development field. The developer is required to control and manage any of land, knowledge, capital and tenants. 8.1 Capital Developers face numerous hurdles in acquiring funding for large projects and recent economic turmoil has made it harder. Capital is one of the most important requirements required. Financial assistance is usually provided because of the following reasons by developers. In order to buy land To cater for the labour and material costs on the project To cater for the operating costs. Development of infrastructure and services on the project In order for property development projects to commence, the project developer is always required to have some reasonable amount of money for both bigger and smaller projects. The developer is not required to start the project if there is no enough money twice as the available one to take the project to the next time when the funds will be available. For the developer to get money, there should be cash at equity invested to cover a portion of the total costs that the project will cost. Cash at equity is referred to as the portion of an asset that can be easily converted into cash. Developers acquire financial assistance through the following ways, borrowing from private companies and banks that aid development funding. In cases of tangible assets such as buildings and land financial assistance is provided in form of property finance. Securing a loan for these assets is so easy to arrange since they are so easy to be sold off. This loan is paid inform of mortgages for a given period of time. This therefore means that future cash flow calculations are important. Banks are typically willing to at least lend up to a given percent of the construction costs and the rest is met by the developer. In Uganda more so Kampala there is no developed mortgage system. This has been overcome by establishments of partnerships between the banks and development companies to acquire capital. During the borrowing of money by developers it should be noted that the quality of project to be developed and the management team employed is key. It helps to have an existing relationship with the bank. Banks are willing to lend to and having an existing relationship is important. This is because the people responsible for lending money feel safe and more comfortable with experienced and established companies and individuals. For example, in the construction of the Kampala fly over budgeted between US$148 to US$200 million. The government borrowed from the government of Japan through the Japan Cooperation Agency. The government was taken as a well-established and trustworthy body. In cases where there are smaller projects to be executed. Developers can join co-operatives. These find members that can pay monthly fess to finance their projects. 8.2 Land Before entering into the process, purchasing of land is one of the main aspects carried out by the start up developers. While buying the capacity of land should be put into consideration by the developers because this affects the cost of the land per unit. This can be better achieved by the use of the different local authorities. For example, Kampala Capital City Authority that plans and implements for local urban development. These also provide the developer with an overview of any future planning or zoning changes in the area which could limit development in the future. Before buying the land the developer always needs to know about the utility access and the zoning restrictions to be sure of the zoning regulations of the land. The developer always needs to know which person is to buy the land onto which the development is to be carried out initially before commencing the process of identifying and purchasing land. This also helps the developer to know the amount of money to be borrowed for the development. 8.3 Knowledge Knowledge is very important about the real estate development process stage by stage. A developer can acquire sufficient knowledge about the land acquisition, market analysis, feasibility, zoning laws, labour laws, construction and project management and sales which play an important role in a successful project. The developer has to educate himself about the development process and the development needs in their community. Knowledge can be acquired through research. Research can be done using online sources, industry reports and interactions with others developers. The developer needs correct information in order to make informed decisions to move the project forward. Information is collected from various sources to gather enough information so that the real estate developer can identify opportunities that exist in the market place. After acquiring an idea, there is need to carry out a feasibility study before starting the actual process. A real estate feasibility study is an analysis conducted before undertaking development to find out if its viable. It also uncovers potential problems and also deconstruct complex tasks in order to execute them in a manageable way. There are different aspects of feasibility studies carried out; economic, technical, legal, demographic, competition. a) The economic focuses on the costs and benefits associated with the development. b) Technical involves determining whether the site terrain and topography, soil composition, environmental factors, zoning restrictions and available infrastructure will support a feasible project. c) Legal investigates whether any aspect of the project conflicts with the legal requirements (zoning laws, other permits and public approvals). Case study; IMPALA HOUSING ESTATE, NAMUGOONA This is a project of the National Housing and Construction Company Ltd that was launched on 30th August, 2016. It is located in Namugoona, a Kampala city suburb, 8km from Kampala on Hoima road. The main objective of developing the Impala Housing Estate in Namugoona was to reduce the growth of slums and provide houses to the increasing population in Kampala. It has 131 housing units with 3 bedrooms. A study was carried out and observed that only a few units were occupied. According to The Infrastructure, August 30, 2017; buyers have always voiced that the National Housing units are more expensive on average and are generally out of reach for many small and medium income earners in Uganda. The National Housing and Construction Company decided and announced to reduce the price of the apartments by 16.4%. the cost was reduced from Shs. 295 million to Shs. 250 million per unit. The price reduction was intended to enable Ugandan’s access decent accommodation. (Monitor, 2017) Figure 1: housing units in Impala estate 8.4 Tenant A tenant is an entity who is permitted to occupy the property of another person by signing a lease or rent agreement. During site selection, the site must satisfy tenant requirements. For example, for rent and resale homes, tenants prefer amenities near the property, particularly proximity to a shopping mall, good school and a hospital. There should also be access to highway and public transportation. (Nsubuga, 2021) Commercial real estate is leased to tenants to conduct income-generating activities for example; office space, retail, industrial. For office space, the rental price charged to tenants is usually $14 to $16 per square meter. (Busuulwa, 2021) “There is a surplus space in the shopping mall segment and lockdown measures have affected customer traffic in these places. That means loss of customers for tenant businesses most of which are located on the ground floors while the upper floors are usually empty.” Said Richard Byarugaba, the managing director at Uganda’s National Social Security Fund. (Busuulwa, 2021). In Kampala, most tenants are obliged to pay monthly rent. Although some tenants are able to pay rent upfront for the contract period stated, while others pay in instalments and some others the landlord has to fight with them to recover their money at the end of the month. This is because of mainly differences in income levels. 9 COSTS INVOLVED IN REAL ESTATE DEVELOPMENT Development cost is the total of all the costs incurred or to be incurred by the project in acquiring, constructing, rehabilitating, and financing the project. These costs occur over most of the stages. Such costs vary depending upon what type of real estate is being consideredthat is to say commercial, Industrial and residential. These costs include; a) Land costs-in real estate developments, land is needed if land is not already owned. They are costs related to: i. Purchase of land ii. Legal Fees to lawyers to draw the purchase agreement iii. Stamp duty paid to Government to transfer ownership Accrues to the commissioner of lands as Government revenue of land is already a possession. The above costs (i) and (ii) are considered owner's equity arrived at by valuation b) Construction costs Include the building element costs-foundation walling, roof finishes services, etc External works-access roads, car parking, drainage iii V.AT at 18% c) Professional fees-15%: Qs, Architects, Engineers (service engineers), interior Design and project manager. Architects-5% Professional fees may add up to 15% of the cost. Alternatively, professionals maybe paid hourly rates Professional fees also attract V.A.T so the professional can deduct input tax e.g., telephone calls, operational expenses-vehicles, before applying V.A.T on his wages. d) Interest on construction funds Interest accrued during period of construction on money borrowed by the client for the project. The client does not start paying the money until the project is complete in which time the borrowed funds earn interest. It has been argued that the interest should be accrued over half the contract period as the funds are provided in instalments and hence the client may be taken to pay interest on money still in the bank if interest is calculated on the whole contract sum e) Project financing cost For big projects which require financing specialists, he advices and makes finance agreements. The financial adviser charges 2% of total project cost. In this case, the funds are sourced from more than one bank. f) Developer's profit It is the incentive to investors for their efforts. They can set their own margin e.g. 10% or 20% of cost. When this is accounted as a cost, the developer can be certain of profitability g) Agency fees Agents are required to market the property once it is completed. They charge 2.5% fee for this service. They can either sell the property rent it, manage the property or do both. h) Equity The client's own contribution to the development cost e.g. land, saving. Any project proposal must have an equity contribution as requirement by financiers. e.g. Savings and loan 20% owner’s contribution HFCK 10% World hank 40% -only deals with governments ADB 30% 10 PLAYERS IN KAMPALA’S REAL ESTATE MARKET In the real estate industry, every player has their place. When working together as a team, each contributes to the big picture. Different professional bodies in the real-estate development project like valuers, engineers, and other related bodies have contributed to the development of real estate projects. 10.1 Real estate developers Developers purchase property with the intent of creating homes, apartments, shopping areas, or other types of real estate. The developer is working to create plans for the neighbourhood, get licenses from the city and organize the construction crew to get homes built, roads created. It’s the developer’s job to ensure that the land is surveyed and each lot is correctly identified for each piece of property. Examples of real estate developers in Kampala include; Millennium Estate Developers Limited, Njovu Estate Developers Ltd. 10.2 Real Estate Broker Real estate brokers are involved in all stages of the real estate process including initial land acquisition, subdivided lot of sales, and property acquisitions and sales. (Yardi Systems, 2020) 10.3 Private individuals These play the role of funders, property owners and users. This market is based on exchange value and is organized at local level. 10.4 Property Manager A Property manager handles day-to-day property issues and helps the owner reach their short-term and long-term real estate investment goals. The service provided must be to the client’s satisfaction, safeguard his interest at all times and, where possible, give consideration to the needs of the eventual user of the facility. (Yardi Systems, 2020) Lenders Real estate lenders can be insurance companies and large private equity firms, traditional banks or hard money lenders, or mortgage brokers and mortgage bankers. They give approved people loans to purchase property. (Yardi Systems, 2020) 10.5 Tenants Tenants are individuals, families, or business that rent a dwelling or commercial space for the appropriate use. (Schofield, 2003) 10.6 Real estate companies The real estate companies have two aims: to generate work for their own business and to make quick profit by selling on the finished properties. There are various reasons as to why they prefer sales to selling (Thierry Theurillat, Olivier Crevoisier, 2015): the prospect of better returns, the time and money involved in property management and the risk of properties lying vacant. Examples of these real estate companies in Kampala today include: Jomayi Property Consultants, Premier Property Management Ltd, Diamond Trust Properties (U) Ltd, National Housing and Construction Co. Ltd, P & E Reality Ltd, etc. 10.7 Construction companies The construction companies are either consultancy firms (Advisors) or general contractors Advisors Advisors maybe real estate agents, consultants or anyone who helps and guides a person or group to buy or rent a property. Consultants provide advice on setting up project, developing and coordinating the designs, preparing production information and tender documentation, contract administration and inspection of the work of contractors. Members of the consultant team are mainly the Architect, Quantity Surveyor, Urban planners and Structural Engineer. General contractors General contractors are responsible for overseeing the construction of a project and providing all of the material, labour, and services needed to bring the project on time and within budget. General contractors in real estate often work with sub-contractors who specialize in different portions of the construction project such as electrical and plumbing installation, and heating ventilation and air conditioning (HVAC) systems. Examples of construction companies in Kampala today include: ROKO Construction Ltd, Seyani Brothers & Co. (U) Ltd, Excel Construction Company, Krishna Construction Company Ltd, Ambitious Construction Co. Ltd, et 11 REFERENCES Bienert, S., & Brunauer, W. (2007). The mortgage lending value: prospectus for development within Europe. Journal of Property Investment & Finance, 25(6), 542-578. doi:10.1108/14635780710829289 Busuulwa, B. (2021, August Tuesday). The East African. Uganda's real estate sector remains resilient despite lockdown shocks. Chen James. (2019). What is Real Estate? investopedia.com. From https://www.com/investopedia.com/terms/r/realestate.asp Cytonrealestate. (2017, September 25th). Kampala real estate Investment Opportunity ''A pearl of Opportunity". From Cyton report: https://www.cytonreport.com/tropics/kampala-realestate-investment-opportunity Graaskamp, J. (1992). Fundamentals of Real Estate Development. Journal of Property Valuation and Investment., 619-639. Graaskamp, James A. (n.d.). Fundamentals of Real Estate Development. Development Component Series. GuideGlobalProperty. (2019). Uganda's housing market gradually improving. From Global Property Guide: https://www.globalpropertyguide.com/Africa/Uganda/Price-History Harvey, J. (1996). Characteristics of the Real Property Market. In: Urban Land Economics. Paigrave, London. doi:https://doi.org/10.1007/978-1-349-24441-6_2 Institute, A. (2001). The Appraisal of Real Estate. Chicago. Knirsch, B. (2000). Real Esate Marketing. Munich, GRIN Verlag. From https://www.grin.com/document/973 Micheal, R. (2019). Assessing coporate real estate managemnet strategies ad their impact on corporatee development; Acase stody of Kampala City ,Uganda. Kampala: Makerere Unversity. Monitor, D. (2017, August Wednesday). Markets. National Housing reduces Namugoona house prices. Kampala, Uganda: Monitor. Nsubuga, U. (2021, July Saturday). New Vision. How to invest in real estate business in uganda. Peca, S. P. (2009). Real Estate Development and Investment . Hoboken, New Jersey : Wiley Publishers. Peiser, R. B., & Frej, A. B. (2003). Professional Real Estate Development (2 ed.). The ULI Guide to the Business. Powell, Richard R. (2009). Powell on Real Property. New Providence: In Wolf, Micheal Alan (ed.). Reed, S. W. (2008). Property Development (5th ed.). London: Routledge. Schofield, T. (2003). Take Online Courses. Earn College Credit. Research Schools, Degrees & Careers. From Study.com | Take Online Courses. Earn College Credit. Research Schools, Degrees & Careers. Thierry Theurillat, Olivier Crevoisier. (2015). The real eastate markets: Players, institutions and territories. SAGE journals, 20. Yardi Systems, I. (2020, september 10). 15 Key Roles in A Commercial Real Estate Team. From CommercialCafe.