EFFECT OF MORTGAGE FINANCING ON REAL ESTATE GROWTH: A STUDY OF
HOUSING FINANCE BANK LIMITED, KAMPALA DISTRICT
BY
PAUL OKELLO
BSC ELE ENG – MAK
13MBA0154
A RESEARCH DISSERTATION SUBMITTED TO HIGHER DEGREES IN PARTIAL
FULFILLMENT OF THE REQUIREMENTS FOR THE AWARD OF MASTER
DEGREE OF BUSINESS ADMINISTRATION (FINANCE) OF
UGANDA MARTYRS UNIVERSITY NKOZI
JULY - 2015
i
Declaration
I, Paul Okello declare that this dissertation is my original piece of work and has not been
published or submitted to any university or institution for any award of a degree
Signed…………………………………… Date………………………………………
Paul Okello
Student
ii
Approval
This dissertation has been written and submitted with the approval of the University supervisor
Signed……………………. ……………Date…………………………………….
Ms. Viola Asimwe
University Supervisor
iii
Dedication
This dissertation is dedicated to my parents Mr. and Mrs. J.P. Etot, who have always wished the
best to me.
iv
Acknowledgment
I give my first acknowledgement to my supervisor: Ms. Viola Asimwe, who has guided me
through the research and the general dissertation writing; without her tireless effort this research
would not have been completed in time and in accordance to the university regulations.
I thank the management of Housing Finance Bank who allowed me to carry out the research at
their institution and the employees who filled in the questionnaires during the study.
With an immense gratitude, I thank my family for the constant encouragement and understanding
during the times when I was busy attending classes at the university and research field study.
v
Table of Contents
Declaration ...................................................................................................................................... ii
Approval ........................................................................................................................................ iii
Dedication ...................................................................................................................................... iv
Acknowledgment ............................................................................................................................ v
List of Tables ................................................................................................................................. ix
List of Figures ................................................................................................................................ xi
List of Abbreviations .................................................................................................................... xii
Abstract ........................................................................................................................................ xiii
CHAPTER ONE ..................................................................................................................................... 1
INTRODUCTION................................................................................................................................... 1
1.0
Introduction ................................................................................................................................... 1
1.1
Background to the study ............................................................................................................... 1
1.1.1 Historical background ................................................................................................................... 1
1.1.2 Conceptual perspective ................................................................................................................. 3
1.1.3 Theoretical perspective ................................................................................................................. 5
1.1.4 Contextual perspective .................................................................................................................. 5
1.2
Statement of the problem .............................................................................................................. 7
1.3
General objective .......................................................................................................................... 9
1.3.1 Objectives of the study.................................................................................................................. 9
1.4
Research questions ........................................................................................................................ 9
1.5
Scope of the study ......................................................................................................................... 9
1.5.1 Content scope .............................................................................................................................. 10
1.5.2 Geographical scope ..................................................................................................................... 10
1.5.3 Time scope .................................................................................................................................. 10
1.6
Significance................................................................................................................................. 10
1.7
The conceptual framework.......................................................................................................... 12
1.8
Conclusion .................................................................................................................................. 13
CHAPTER TWO ........................................................................................................................ 14
REVIEW OF LITERATURE .................................................................................................... 14
2.0
Introduction ................................................................................................................................. 14
2.1
Literature survey ......................................................................................................................... 14
vi
2.2
Theoretical Framework ............................................................................................................... 15
2.2.1 The Modern Portfolio Theory of Management ........................................................................... 16
2.2.2 Structural Form theory ................................................................................................................ 18
2.3
Study literature ............................................................................................................................ 19
2.3.1 Accessed mortgage finance and real estate growth..................................................................... 20
2.3.2 Repayment period and real estate growth ................................................................................... 27
2.3.3 Mortgage default and real estate growth ..................................................................................... 29
2.4
Conclusion .................................................................................................................................. 31
CHAPTER THREE .................................................................................................................... 32
METHODOLOGY ..................................................................................................................... 32
3.0
Introduction ................................................................................................................................. 32
3.1
Research design .......................................................................................................................... 32
3.2
Study area and population ........................................................................................................... 32
3.3
The sample size and selection ..................................................................................................... 33
3.4
Sampling techniques ................................................................................................................... 33
3.5
Sources of Data Collection ......................................................................................................... 34
3.6
Methods of data collection .......................................................................................................... 34
3.7
Data collection instruments ......................................................................................................... 34
3.7.1 Self – Administered Questionnaires ........................................................................................... 34
3.8
Reliability and Validity ............................................................................................................... 35
3.9
Data Management and Analysis ................................................................................................. 35
3.10
Ethical Considerations ................................................................................................................ 36
3.11
Limitations ........................................................................ Ошибка! Закладка не определена.
3.12
Conclusion .................................................................................................................................. 36
CHAPTER FOUR ....................................................................................................................... 38
PRESENTATION, INTERPRETATION AND ANALYSIS OF THE FINDINGS ............. 38
4.0
Introduction ................................................................................................................................. 38
4.1
Bio-data of the respondents......................................................................................................... 38
4.2
Research Objectives .................................................................................................................... 43
4.2.1 Accessed mortgage funds and real estate growth ....................................................................... 43
4.2.2 Mortgage finance default ............................................................................................................ 47
4.2.3 Repayment period and growth of real estate ............................................................................... 53
4.3
Mortgage finance and growth of real estate ................................................................................ 56
vii
4.4
Statistical analysis to the findings ............................................................................................... 57
4.5
Conclusion .................................................................................................................................. 59
CHAPTER FIVE ........................................................................................................................ 61
DISCUSSION, CONCLUSION AND RECOMMENDATIONS ........................................... 61
5.0
Introduction ................................................................................................................................. 61
5.1
Discussion of Findings ................................................................................................................ 61
5.1.1 Effects of accessed mortgage funds on real estate growth .......................................................... 61
5.1.2 Effects of mortgage default on real estate growth ...................................................................... 62
5.1.3 Effects of mortgage repayment period on real estate growth...................................................... 63
5.2
Conclusion .................................................................................................................................. 64
5.3
Recommendations ....................................................................................................................... 64
5.4
Areas of further Research ........................................................................................................... 66
References .................................................................................................................................... 67
Appendices ................................................................................................................................... 70
Appendix A .................................................................................................................................. 70
viii
List of Tables
Table 3.1
Illustration of the sample size and distribution…………….……………………34
Table 4.1.1
Types of real estate developed by mortgage finance……………………………41
Table 4.1.2
Repayment period for mortgage………………………………………………...41
Table 4.1.3
Mortgage finance is the best approach to fund real estate………………….…..42
Table 4.1.4
whether the bank attracts its employees to real estate development.............…...43
Table 4.2.1
Accessed mortgage finance helps in getting new construction sites……………44
Table 4.2.2
Accessed mortgage finance helps to pay workers……………………………....44
Table 4.2.3
Accessed mortgage finance increase moral among developers……………..….45
Table 4.2.4
Accessed mortgage finance increases developers assets…………………….....45
Table 4.2.5
Accessed Mortgage finance increases on real estate growth…………………..46
Table 4.2.6
Accessed mortgage finance attracts investors into real estate development…..47
Table 4.3.1
Mortgage finance default hinders daily activities of Housing Finance Bank…48
Table 4.3.2
Mortgage finance default creates employee turnover…………………………48
Table 4.3.3
Mortgage finance default hinders growth of real estate………………………49
Table 4.3.4
Mortgage finance default compels the bank to sell assets of developers…….50
Table 4.3.5
Mortgage finance default hinders administrative work of HFB……………...50
Table 4.3.6
Mortgage finance default reduces the financial resources of the developers…51
Table 4.3.7
Mortgage finance default reduces the development of real estate…………….52
Table 4.3.8
Mortgage finance default stresses the developers……………………………..52
Table 4.3.9
Repayment period creates ample time to accumulate profits among developers
…………………………………………………………………………………53
Table 4.4.2
Repayment period promotes activities for the growth of real estate………….54
Table 4.4.3
Repayment period allows planning for estates………………………………..55
Table 4.4.4
Repayment period allows consultations with stakeholders…………………...55
ix
Table 4.5.1
Mortgage finance increases the rate of real estate development…………….57
Table 4.5.2
Mortgage finance is better than loans in development of real estate………..57
Table 4.5.3
Mortgage finance suits the conditions in Uganda…………………………..58
Table 4.6.1
Test statistical significance about accessed mortgage finance to the growth of real
estate…………………………………………………………………………58
Table 4.6.2
Test statistical significance of mortgage finance default in HFB on real estate
growth……………………………………………………………………….59
Table 4.6.3
Test statistical significance of repayment period in HFB on real estate growth
………………………………………………………………………………59
x
List of Figures
Figure 1.1
Conceptual framework…………………………………………………………..12
Figure 4.1.1
Gender of respondents…………………………………………………………...38
Figure 4.1.2
Age of respondents………………………………………………………………39
Figure 4.1.3
Level of education of respondents……….………………………………………40
Figure 4.1.4
Attitude of developers to mortgages…………………….…………………….....42
xi
List of Abbreviations
ABS
Asset Backed Securities
BOU
Bank of Uganda
CDO
Collaterized Debt Obligation
DFCU
Development Finance Company of Uganda
EADB
East Africa Development Bank
EU
European Union
FMBN
Federal Mortgage Bank of Nigeria
GDP
Gross Domestic Product
HFB
Housing Finance Bank
IMF
International Monetary Fund
MPT
Modern Portfolio Theory
MREPT
Modern Real Estate Portfolio Theory
MBS
Mortgage Backed Securities
NHTF
National Housing Trust Fund
PTA
Preferential Trade Area
REDAN
Real Estate Developers Association of Nigeria
REIT
Real Estate Investment Theory
SPSS
Scientific Program for Social Scientists
SPV
Special purpose Vehicle
SSA
Sub-Saharan Africa
UBOS
Uganda Bureau of Statistics
UGX
Uganda Shillings
xii
ABSTRACT
The study investigated the effect of mortgage financing on real estate growth taking Housing
Finance Bank as a case study in Kampala District. In doing so, the study objectives were: 1) to
establish how accessed mortgage funds from Housing Finance Bank affect real estate growth; 2)
to analyze the effects of mortgage default in Housing Finance Bank on real estate growth; 3) to
examine the effects of mortgage repayment period in Housing Finance Bank on real estate
growth
A cross sectional survey research design was used on a total population of 150; of whom 80
respondents selected as sample size. Both purposive and random sampling techniques were used
to reach the sampled respondents under which Self- Administered Questioners used as tools to
collect the data composed of qualitative and quantitative information. The data was organized by
the computer programme – Scientific Program for Social Scientists (SPSS) and analyzed using
the chi-square.
The findings reveal that accessed mortgage fund is instrumental to developing real estate in
Uganda although most people do not have the ability to access it. It was also found that default
of the mortgage finance does not only affect the developing the estate but more the banks whose
funds are used in the process. The study also reveals that repayment period to developers is short
and there is a need to increase on the period to the clients. While the conclusion shows that the
idea of mortgage finance is good enough to the development of the estate, there is a need to
construct houses by the bank such that people without security can buy houses directly. There is
also a need to use more simplistic policies but more sensitive in reclaim the mortgage finance
from the clients.
xiii
CHAPTER ONE
INTRODUCTION
1.0 Introduction
The study examined the effects of mortgage financing on real estate growth using Housing
Finance Bank Limited (HFB Ltd) in Kampala District as a case study. As urban population
increases partly due to rural-urban migration, accommodation becomes scarce and this attracts
stakeholders in housing and construction to increase impetus in constructing houses to
accommodate the increasing number. In Kampala District, developers and stakeholders normally
get mortgages from Housing Finance Bank Ltd to buy or construct real estates and houses.
Despite of its effort to give mortgage finance, UBOS (2010) reveals a crisis of 550,000 housing
units of which 160,000 are in urban areas and 100,000 units in Kampala alone. This study
established the effects of mortgage financing by HFB Ltd on real estate growth in Kampala
District. This chapter starts with background to the study, statement of the problem, objectives,
research questions, scope and significance.
1.1 Background to the study
1.1.1 Historical background
Housing Finance Bank is one of the commercial banks in Uganda that has been licensed by the
Bank of Uganda (BoU) in 2008 to carry out its commercial activities in the nation (Juuko, 2010).
It was incorporated in 1967 as a housing finance company of Uganda Limited carrying out
business as a non-banking credit institution with focus on providing mortgage finance for
construction of residential houses and accepting saving deposits from the public. According to
BoU (2014), Housing Finance Bank was the 9th largest commercial bank in Uganda with an
1
asset base estimated at approximately US$220.1 million (UGX:558.4 billion), and shareholders'
equity of approximately US$42 million (UGX:106.4 billion); representing about 3.5 percent of
all bank assets in the country at that time.
According to Juuko (2010), the National Social Security Fund (Uganda) owns 50 percent of the
Housing Finance Bank and the Government of Uganda through the Ministry of Finance owns 45
percent. The remaining 5 percent is owned by the National Housing and Construction Company.
In its mission, Housing Finance Bank has major attributes such as Vision, Mission and Values.
Its value is to become innovative African Bank that enables people to realize their financial
dreams. The Mission is to provide financial solutions to a diverse community through efficient
and effective systems so as to exceed customer expectations and enhance shareholder value
while its value is to cherish Excellence, Customer Centricity, Continuous Learning, Integrity and
Teamwork.
The main objective of Housing Finance Bank rotates around increasing the construction,
purchase, extension or improvement of residential and commercial residential properties, and
purchase of plots in urban areas within Kampala and its suburbs. According to HFB (2014),
individuals are eligible to access the mortgage if they have monthly repayment not exceeding 35
percent of ascertainable monthly income. Where an individual’s regular income is not sufficient,
additional security is required. For individuals looking for mortgages using property such as
land, a valid land title and building plans with local authority approval, are a must and to be
presented to the bank official in charge for careful scrutiny. In addition to these, the construction
must be in permanent materials and the building serviced / to be serviced with water and
electricity. Mortgages are given depending on the current modern Uganda a minimum of UG
SHS 5 million depending on the property location and value. The loan available cannot exceed
2
70 percent for construction of residential units in Kampala, 80 percent for purchase of property
within Kampala, 60 percent for an urban plot loan this should not exceed 80 million, 60 percent
for equity release loans of the property value as given by the bank’s valuer and Maximum 30
million for the growing houses.
1.1.2 Conceptual perspective
The literal definition of a mortgage to this study was coined from Tuma (2005) where he defines
a mortgage as something that occurs when owners pledge interest as security or collateral for a
loan. This means that a mortgage can apply to any sort of property such as a car, land and a
building. The working definition for mortgage that was used to this study was an instrument that
is used as a pledge to real estate or as a security for an obligation in the process of pledging real
estate as security (Hassanein and Barkouky, 2008). It needs to be emphasized that mortgage
financing industry in Uganda has grown in different perspectives but the most recognized ones
are three dimensions. These include mortgage related products on offer, the banking institutions
in the mortgage industry and the value of the mortgage portfolio (Hadiya, 2012). In the current
Uganda, a total of nine banking institutions including Housing Finance Bank, Development
Finance Company of Uganda Bank Limited (DFCU) Bank, Stanbic Bank, Barclays Bank, Equity
Bank, Standard Chartered Bank, Centenary Bank, Kenya Commercial Bank and Bank of Africa
are offering mortgage facilities (Ngumo, 2012). However, this study considered mortgage
finance from the Housing Financial Bank.
Mortgage financing refers to a loan secured by collateral of some specified real estate property
that the borrower is obliged to pay back with predetermined set of installments over certain
period regulated by the bank in question (Bienert and Brunauer, 2006). This was taken as an
3
operational definition and more relevant to this study. It was taken as a loan secured by collateral
of some specified real estate property that the developer or the borrower is meant to repay within
the agreed period of time and installments. It is usually for the purchase or construction of
housing estates (real estate) by individuals or companies. According to Obody (2013), countries
in Africa continue facing housing deficits emanating from interest rates that put demand for
finance at ebb. It is noted that without any exception the Sub-Saharan Africa face significant
housing deficits due to poorly developed housing institution and markets, stocks which are in
poor condition, a huge backlog of housing need and weak policy responses (Njiru and Moronge,
2013)” . Awuvafoge (2013) is of the view that housing deficit in Sub-Saharan Africa has led to
the entry of international housing finance institutions such as Shelter Afrique, East Africa
Development Bank (EADB), and Preferential Trade Area (PTA) bank. He further remarked that
the extent of housing deficit is huge in Africa, as exemplified by the housing deficits in countries
of East Africa and Uganda in particular. It is from this circumstance that mortgage finance was
born to fill such gaps.
On the other hand, real estate is a property of land and buildings on it along with natural
resources such as crops, minerals or water that are immovable property in nature (Bienert and
Brunauer, 2006; Oxford English Dictionary, 2011). Real estate growth was used to refer to
expansion of estate houses in a nation as a result of demand and supply forces in the market.
Edelstein and Tsang (2007) noted that the process of real estate growth is a long one and stems
from demand or crisis within the housing sector that normally attract developers or borrowers to
seek for mortgage finance from the banks to develop real estates to fill the growing crisis.
Normally, the rising prices for houses due to the bust of real estate create a cycle that calls for
4
intervention. These were taken as operational definitions explaining independent and dependent
variables of the study.
1.1.3 Theoretical perspective
The study was guided by a Modern Portfolio Theory (MPT) of management of investment
finance developed by Harry Markowitz. After Thirty-eight years, he shared a Nobel Prize with
Merton Miller and William Sharpe for what came to be a broad theory for portfolio selection and
corporate finance. The theory examines how risk averse-investors construct portfolios in order to
enhance market risk against expected returns. It quantifies benefits of diversification.
1.1.4 Contextual perspective
The contextual perspective whirled on mortgage financing and real estate growth in Uganda.
Housing Finance market contributes significantly to addressing problems of housing inadequacy
or insufficiency by providing home buyers with long-term mortgage loans and relatively
moderate monthly installments (Addai, 2011). The availability of Finance is a key issue for any
housing development activity. It affects developers, contractors and the ultimate buyers of the
housing units. An efficient and sustainable housing finance regime is a pre-requisite for
sustainable housing delivery for the citizens of a nation (Addai, 2011). The Center for Affordable
Housing Finance in Africa (2013) records that the 2002 Population and Housing Census of
Uganda presents that 70 percent of houses are built with temporary building materials. Of these,
27 percent are in urban areas. Onoria (2007) further reveals that commercial real estate market
worldwide is increasing and dominated by institutional investors yet in Uganda the information
about real estate and their management is largely limited.
5
Banks in the country normally offer mortgages in which Ugandans can beautify or modernize
their houses but majority of Ugandans have not picked interest to apply for mortgages and some
players in housing sector blame it to poor economic performance of the country's economy
which lowers the purchasing powers of the local people especially those in private sector.
Mortgage financing has many challenges in Uganda such as inflation rate and this leads
commercial banks to increase interest rates on mortgage financing; and generally affect mortgage
business. Some Banks such as Centenary Rural Development Bank have subsidized their
mortgages for low income earners but hardly do Ugandans apply for them. Due to intricacy
involved in general process of mortgage financing, many real estate companies try to diversify
businesses to provide land and looking for tenants yet they are unsustainable.
Besides, there is financial constraint that normally affects effort to mortgages. These are absolute
lack of long-term funds due to absence of private or public contractual savings products and
limited long-term funds that normally exist. Of 5.2 million households, only 0.6 percent can
access mortgage loans through commercial banks (World Bank, 2009). Uganda’s mortgage
lending is therefore very limited. The country has two financial institutions with mortgage books
of repute: the Housing Finance Bank (HFB) and the Development Finance Company of Uganda
(DFCU). The former has had difficulty in managing its book while the latter is seeking lines of
credit so that it can increase its long-term lending. It is from this contextual perspective that the
study assessed effect of mortgage financing on the growth of real estate using Housing Finance
Bank in Kampala District.
6
1.2 Statement of the problem
The rapid increase in the size and cost of projects through the years has created a new dimension
to real estate industry with regards to project financing. There is a need for real estate developers
to access long term finance for their project investments. In the modern mortgage markets,
mortgage transactions are effectuated in the primary mortgage market between the borrower and
the mortgage originators. Mortgages originated in the primary mortgage market are sold into the
secondary mortgage market as part of a package of mortgages that comprise a mortgage-backed
security (MBS), Asset-Backed security (ABS) or collateralized debt obligation (CDO) (Olumide
et al, 2013). Where both markets exist, loans tend to be long term with fixed rates while where
only the primary market exists; loans are short term with variable rates because these mortgages
are funded through deposits and deposits are short term.
Pittman (2008) is of the view that obtaining a mortgage in today’s market is a complicated
process since it involves many procedures like identifying the best service provider with best
interest rates which has stood challenges to most people as well as developers. Besides,
repayment period has remained a major challenge since it is low. Agaba et al (2009) confirmed
that in the current housing crisis, family and friends have become imperative in sensitizing
developers and consumers about mortgage options and what to expect at the end. The housing
finance sector is constrained by lack of sufficient long-term liabilities, owing underdeveloped
pension industry and a limited life insurance funds (Kalema et al, 2013). Kalema et al (ibid) go
on to assert that in Uganda, mortgage finance is not growing significantly and this calls for
analysis to come up with improved ways to increase its growth. There is lack of sensitivity in
mortgage rate setting to the macro environment in Uganda which hinders the increase in the
number of the people or individuals that would have involved in real estate growth. The absence
7
of a strong link to capital market funding and the lack of consumer price elasticity mean that the
bank is able to offer rates which are much higher than its cost of funds (World Bank, 2011). The
difficulty with such a high interest margin for term finance is that it has to be additional to the
capital market rate as set by the supply curve.
According to UBOS (2010), there is a housing crisis of 100,000 units in Kampala District and
Ministry of Lands; Housing and Urban and Urban Development (2012) asserted that housing
crisis is likely to hit 160,000 units in Kampala City by 2020. There is therefore a need to increase
accessibility to finance by residential property developers. This calls for participation of
government and lending institutions to provide financial assistance to real estate developers to
increase the rate of construction. Real estate is a capital intensive investment and developers
often face challenges in accessing finance, to complete the various stages in their development
process which they commence with cash savings and personal loans from family members and in
other cases from money lenders. In Uganda, lack of access to long term capital is a major barrier
to real estate delivery. Even though the government policies recognize the private sector’s
dominant role in housing provision, the banks have short term funding and unable to lend on
medium or long-term bases, thus crippling the real estate industry. Berry et al (2010) asserts that
when households fail to meet their mortgage repayments, they take on more and more expensive
debts, they take on more debts by borrowing from family and friends, some house hold members
increase their level of labour market participation to increase their earnings, bankruptcy as a
consequence of loan default and loss of mortgaged property to the mortgagee. The Mortgagor
may be forced to sell the property or to rent out the property and raise income to pay back the
debt.
8
Through Mortgage lending, the bank is able to improve its performance and Profitability, attract
more customers, Promotion of innovation and market penetration, increased income and
economic growth and diversification of portfolio. There is also the effect of fraud between bank
staff and mortgagor. This therefore attempted to establish the effects of mortgage financing on
real estate growth in Kampala District.
1.3 General objective
The study examined the effects of mortgage financing from Housing Finance Bank on real estate
growth under
1.3.1 Objectives of the study
i.
To establish how accessed mortgage funds from Housing Finance Bank affect real estate
growth
ii.
To analyze the effects of mortgage default in Housing Finance Bank on real estate growth
iii.
To examine the effects of mortgage repayment period in Housing Finance Bank on real
estate growth
1.4 Research questions
i.
What are the effects of the accessed mortgage funds from Housing Finance Bank on real
estate growth?
ii.
What are the effects of mortgage default in Housing Finance Bank on real estate growth?
iii.
What are the effects of mortgage repayment period in Housing Finance Bank on real
estate growth?
1.5 Scope of the study
The study scope whirled on the content scope, geographical scope and the time scope.
9
1.5.1 Content scope
The content scope remained mortgage financing and its effect on real estate growth. It is hoped
that accessed mortgage funds contribute to real estate growth and in such circumstances housing
crisis would have been curbed. This has however failed to materialize in Uganda and the need to
examine the effects mortgage funds on real estate growth in Uganda calls for this research.
1.5.2 Geographical scope
The geographical scope was Kampala District on Hosing Finance Bank. Kampala District was
chosen because of its primacy in holding Capital City where most housing and construction
activities have been taking place since 1964. Besides, Kampala District has most of the houses or
real estate that have been financed by Housing Finance Bank. The researcher felt that in a
geographical scope where there is Housing Finance Bank giving mortgage finance to developers
to buy and build houses, a study of this kind is appropriate to the desired results.
1.5.3 Time scope
The time scope was between 2008 and 2013. This is the period when real estate has experienced
considerable growth amidst housing crisis. The researcher found a need to establish if growth has
been a result from mortgage financing. Besides, what are the effects of mortgage financing on
the real estate growth? Is the housing crisis in Kampala District a result of mortgage defaults or a
result of the usability of the accessed mortgage finance? This study addressed such issues and
the findings to the study have been presented in chapter four of this dissertation. .
1.6 Significance
This study remains significant to academicians by contributing to the body of knowledge and
broadening the scope in the areas of mortgage financing and real estate growth. While the study
10
remains a reference to future academicians, its empirical evidence in the field of mortgage
financing and real estate growth stimulate further researchers into the field. It is hoped that
increased number of studies about mortgage finance and estate growth remain the basis for the
increased number of houses in Kampala District. This is because the study would stimulate more
developers to access mortgage finance for such cause.
Commercial Banks such as Housing Finance Bank and population at large find the information
useful. Commercial Banks realize where they have gone wrong in giving mortgage finance under
the case study of Housing Finance Bank while providing services to the developers in Uganda.
The population and developers of real estate in particular also work to strike a balance and
enhancing cordial business relations with the banks. In such circumstances, the researcher feels
that the housing crisis would have been curbed.
The study is important to the Government of Republic of Uganda and its policy makers. The
Government of Republic of Uganda finds the study imperative since it reveals the operation of
the mortgages using a case study of HFB. Recommendations delivered from HFB have
significant impact in reference to development and building houses in Uganda.
The policy makers and parliamentarians in particular find the study instrumental because it
stands basis for the policy reformation of the mortgage finance industry. In turn, the researcher
hopes that policy makers and the government come up with a policy on subsidizing for the real
estate growth.
The study increases the body of knowledge on challenges relating to mortgage financing and real
estate growth in Kampala District. Besides, it fulfills its importance under which it was carried
11
out; fulfilling the requirements for the award of the degree of a master of business administration
of Nkonzi University.
1.7 The conceptual framework
The conceptual framework herewith presents the relationship of independent, dependent and
intervening variables in the process of real estate growth. This is presented on figure 1.1
Fig. 1.1: The Conceptual Framework



Real estate growth (DV)
 Acquiring land by a
developer
 Rate of construction
 House purchase price
increase
Mortgage Financing (IV)
Accessed funds
Repayment period
Default rate
Government intervention (MV)
 Influencing banks to subsidize
 Provision of land to developers
 Use a good tenure system and cost
 Provision of infrastructure at
moderate cost
 Land act and reforms
Source: Evans and Mendenhall; 2002
The conceptual framework on figure 1.1 presents mortgage financing as an independent variable
and how it affects real estate growth (dependent variable). Mortgage financing depends on the
conditions for accessing mortgage, the repayment period and the consequences of the mortgage
default. Real estate growth involves acquisition of land by developers, the rate of construction
and rise in house purchase prices.
12
1.8 Conclusion
All in all, the background to this study captures the history of mortgage financing in relation to
real estate growth in Uganda. The objective of this study has been stated as to examine the
relationship between mortgage financing and real estate growth, and expands while writing the
dissertation.
13
CHAPTER TWO
REVIEW OF LITERATURE
2.0 Introduction
This chapter presents review of literature in relation to the topic of the study and specific
objectives. It starts with the literature survey, theoretical framework and related literature basing
on the objectives of the study and the different variables therein.
2.1 Literature survey
In his study about the market report, Rugasira (2007) aimed at establishing the rate at which
commercial banks have been at the frontline of development in Uganda. He noted that
commercial banks get more money from developers of real estate and residential houses. This
has been the most reason why there is low rate of real estate in Uganda. He asserts that there is
little empirical evidence elucidating the behaviour of the banks to the development and growth of
real estate. As a result, most of the houses that are constructed, 80 percent of the households lack
toilets, 34 percent of the city’s housing stock are in need of upgrading or replacement, 36 percent
are built of mud and bricks, 65 percent of the households in Kampala live in rental
accommodation that has been poorly develop, with 71 percent occupying rooms as opposed to
housing regulations. While the situation in Kampala attracts developers to develop and increase
growth of real estate, few developers have been involved into the business. This calls for a study
to explain the extent to which mortgage finance is beneficial to the development and growth of
real estate.
In a study that was carried out by Kibirige (2006) in Uganda on Mortgage Financing, the study
aimed at establishing how mortgage finance has worked in Uganda. It was found that mortgage
finance makes it possible for people to acquire affordable housing as they have the option to own
14
their homes and pay for them in affordable installments over time. It was also found that
mortgage finance assist individuals to acquire land on which investors build affordable houses.
These installments are however paid by individuals who have varied security and clear
background with certain time of repayment period to the bank. It was for this reason that this
study assessed the repayment period with the HFB.
In yet another study by Kibirige (2006); he assessed the important factors considered in
appraising viability of a mortgage application is the capability of the borrower to repay their
mortgage. While the major focus was put on availability of mortgage finance to developers, the
study does not elucidate the burden incurred by developers of real estate in the process. This
study brings the risks and the burden incurred by developers in due course to the developing of
the real estates. In the same study, he noted that mortgage finance sector creates employment
directly and indirectly particularly to the construction industry and indirectly to other sectors but
the effects of mortgages to the development of the real estate have little information in Uganda.
Besides, the youths have been employed in the due course but how developers benefits in the
process is still lacking.
Further there is interest-rate risk to either party to a loan that the interest rate move against them
and finally prepayment risk to the lender that the borrower can repay a loan (particularly a fixedrate loan) before the end of its term. In Uganda, real estate is also faced with the risk of unoccupancy (Agaba et al, 2009) and this study tries to explain such studies.
2.2 Theoretical Framework
The study was guided by the Modern Portfolio Theory (MPT) of managing finance by Harry
Markowitz in 1952 and the Structural Form theory by Pottow (2007).
15
2.2.1 The Modern Portfolio Theory of Management
The Modern Portfolio Theory (MPT) is a theory of finance that attempts to optimize portfolio
expected return for a given amount of portfolio risk, or equivalently to minimize risks for a given
level of expected return; by carefully choosing the proportions of various assets. The theory
explores how risk averse-investors construct portfolios in order to optimize market risk against
expected returns. It quantifies the benefits of diversification; out of a universe of risky assets, an
efficient of optimal portfolios can be constructed.
According to the theory, each portfolio at the target offers a maximum expected return for a
given level of risk. Developers of real estate therefore take risks by exchanging mortgage with
real cash; they later invest into real estate not knowing what to be accrued. Notably, each
portfolio on the efficient target offers a maximum possible expected return for a given level of
risk. At this stage, developers hold one of the optimal portfolios on the efficient target and adjust
their total market risk by leveraging that portfolio with positions in the risk-free asset. In a highly
simplified world, the market portfolio sits on the efficient target, and all investors hold that
portfolio, leveraged or deleveraged with positions in the risk-free asset.
Modern Real Estate Portfolio Theory (MREPT)
Mueller et al (1995) added on what Harry Markowitz (1952) had developed in lieu to real estate
development and management. They explained why institutional developers should continue
considering both private direct real estate investments and public forms of ownership in order to
develop optimal portfolio for appropriate sub-categories of real estate assets. According to the
theory, market depth, liquidity, asset quality, diversification and price fluctuation are inclusive in
a strategic portfolio of management criteria of real estate.
16
On management, investment styles and return objectives of real estate portfolio management
need to focus on higher return strategies: wealth creation, value added, income enhancement and
incremental risk. The ability of Real Estate Investment Theory (REIT) to achieve these goals
through direct real estate (active) portfolio management is determined by management skills and
experience of the mangers of real estate. Due to real estate illiquidity and asymmetric
information flows, portfolio diversification and optimization strategies are followed over
multiple periods. Where it may take stock mangers weeks to adjust the portfolio to new optimal
weights based on new return and risk information, it may take the real estate portfolio managers
up to three years to adjust the portfolio, depending on size and market conditions. When
developing large institutional real estate portfolios, one of the main objectives is to identify and
target outperforming markets based on high risk-adjusted rates of return.
Factors used in determining target markets are: real estate market opportunities, demographic
attributes and market size. Due to the capital intensity, high transaction and information costs,
most direct real estate portfolio managers underwrite properties on a buy and hold basis,
extending the investment horizon. This allows the manger to focus on long-term cyclical labor
market and demographic trends. For example, the emergence of the echo-boomer and retirement
of the baby-boomers are expected to support apartment markets in the future.
There are many factors contributing the supply of apartments: tax policy, capital availability,
estimated demand by developers which need to be included in managerial issues. Statistically,
significant variables determining new apartment supply are: mortgage interest rates, housing
affordability index, employment change, vacancy rates, and taxes.
17
Real Estate Portfolio Development
Under the management of real estate, the theory has that institutional real estate portfolio
development need to be conducted in an integrated top-down/bottom-up approach. Top-down
approach starts with national market and economic analysis, regional market and economic
analysis, local market and economic analysis, and property level analysis; and then the process
starts back up again.
At the national level risks analyzed include: inflation, industrial production, risk premiums, term
structures, business cycles and taxes. At the regional level, risks analyzed include unsystematic
risks, employment based and growth, demographic trends, income level and growth and vacancy
rates. At the local level, risks analyzed include; employment base and growth, demographic
trends, income levels, vacancy rates, construction levels and costs, space utilization rates and
taxes. At the property level, risks analyzed include physical characteristics, location and site
characteristics, lease characteristics, property management expertise and financing.
2.2.2 Structural Form theory
This theory was formulated by Pottow in 2007. It documents the evolution of mortgage finance
in SSA (Sub- Saharan Africa) to determine what steps need to be taken to extend it to the
middle-class, to enable them address their housing needs to the extent of their affordability. The
theory reveals that there have been a number of problems when it came to the delivery of formal
housing finance amongst most, if not all the countries.
These problems are a record of macroeconomic instability, an adverse institutional, legal and
regulatory environment which has resulted in inefficient, collateralization of housing assets, a
poor record of public sector housing banks, building societies and other specialist housing
18
lenders in that most have been destroyed due to poor management and a lack of funds and
limited availability of long-term funding sources to carry out intermediation that would spread
the cost of a house over a relatively long period of time.
Arising out of this dismal history is a move to revive and introduce mortgage lending into a
number of countries. Moreover, as part of the move to straighten out financial markets, a number
of consultants have been sent into SSA countries to begin documenting the specific problems of
each country as well as to make recommendations on how to address them. Development agents,
in particular, are also putting forth recommendations on what is required to ensure financial
market development and capital market investment necessary to entice the private sector into the
delivery of housing finance
2.3 Study literature
This part presents the review of literature in relation to the topic and objectives of the study. It
starts with how accessed mortgage finance affects real estate growth, effects of mortgage finance
default and ends with the effects of mortgage repayment period on real estate growth. In lieu to
the issues at hand, one needs to recall that despite the use of mortgage finance in Kampala
District, there is still a housing crisis that needs serious attention. Although this situation is in
Kampala District, the literature hereunder reveals that the situation is found in other areas of the
globe. This study therefore seeks to establish the effects of mortgage financing on real estate
growth with questions such as: why has the crisis continued amidst of mortgage financing? The
literature presents that some institutional developers normally diverts from real estate growth to
land broking by putting aside the main aim of working towards real estate growth. Has the
change been a result of mortgage financing period or defaults incurred as pressure from the
19
banks increase in the due course? This study answers such issues in lieu to objectives of this
study.
Besides, in developed nations, the period for mortgage servicing or repayment period starts from
25 years and beyond yet it has never been so to developing nations (Ngumo, 2012. This study
explains the effect which interest rates have on mortgage finance in reference to time lag and
how this has been hindering the growth of estate using a case study of HFB in Kampala District.
2.3.1 Accessed mortgage finance and real estate growth
Evans and Mendenhall (2002) observed that accessed mortgage finance is vital in solving
housing crisis among developing countries and the challenge with such countries is how to make
people own homes irrespective of their small earnings and estates developed for commercial
purposes. They revealed that as a result of housing deficit, Sub-Saharan Africa is likely to
encounter housing crisis if adequate approaches are not taken to address it. Effective mortgage
financing is a key to addressing the housing deficit by constructing real estates as well as private
houses among individuals.
Hoek-Smit (2011) remarked that in Nigeria, accessed mortgage finance produce results in mass
housing. In year 2000 for example, the Federal Mortgage Bank of Nigeria gave a sum of 5.8
billion naira (now about 38m USD) to National Housing Fund which was established by Decree
No. 3 of 1992 as a major means of mortgage lending for building of houses. Besides, Real Estate
Developers Association of Nigeria (REDAN) was set to put in place Special Purpose Vehicle
(SPV) to enhance the expansion of mass housing. The President of association, Chief Olabode
Afolayan, disclosed that the SPV is money that would assist developers in massive buying of
building materials and offer them subsidy. Haggai Savings and Loans Limited (Mortgage
20
Bankers) at Surulere - Lagos provides financial support to its customers while Susu
Microfinance Bank Ltd gives financial support to Nigerians that are in need of it and Guaranty
Nigerian Bank (Microfinance Obodoukwu) offers loans and encourages investment among the
inhabitants of Obodoukwu community in housing estate.
In actual terms, mortgage loans are loans used to finance house purchase that are secured with
property so that in case the borrower fails to make the required repayments, the lender takes
possession of the property under the terms of the loan agreement and has the right to sell it to
recover the debt. Loans to finance the purchasing of houses are often long-term loans—typically
25 years in developed countries. The World Bank (2011) puts it clearly that mortgage loans can
only be made when there are clear properties ownership rights. That those in developed countries
are often available at a low margin over the cost of funds due to high security in terms of
property rights. Individuals are more inclined and capable of investing in housing when they
have proper title for their assets.
Compared to other financial arrangements, the World Bank (2012) remarks that accessed
mortgage finance helps in purchasing affordable houses and allows people to buy at a lower
price. This ultimately stimulates housing market to the benefit of developers as well as existing
home owners. This increases demand for houses and encourages savings. As a consequence,
Boleat (2002) is of the view that a strong mortgage market widens financial system, efficient and
well-functioning mortgage market. While the above assertion is significant to the developers,
Jolaoso et al (2008) is of the view that any significant real estate growth requires tax and
business planning; and for real estate developers there are not only in unusual situations and
problems but unique opportunities to solve and minimize such matters. This according to Jiboye
21
(2009) accessed and used finance in the process of housing and construction is the most
significant since it assist developers in different ways. He elucidated that not all the accessed
mortgage however is beneficial to the cause of construction. Jiboye (2011) noted that while
many developers access mortgage finance for construction purposes, others access mortgages in
disguise to this plan but have other motives. The later fall victims to housing and construction in
different ways.
Mutero (2007) and Ibuoye (2009) noted that the process of accessing mortgage finance is
conducted in multiple entities and involves separate partnerships for each property with unrelated
investors or joint venture participants. Thus accessing long term credit facility has been a great
challenge among developers. Kuroshi and Bala (2005) remarked that despite the existence of
long term credit facility in the National Housing Trust Fund (NHTF), it operates on a depository
arrangement whereby civil servants and self-employed persons contribute 2.5% of their monthly
income into the Fund through their employers or directly to the Federal Mortgage Bank of
Nigeria (FMBN) in order to access loan. Nonetheless; a few contributors have benefited from
mortgage loan. Ozili (2009) observed that the NHTF is inadequate in meeting the housing needs
of real estate developers and contributors. The conditions for accessing loans are not affordable
to everybody. Private financial institutions have started packaging mortgage loan to prospective
property developers but Kuroshi et al (2008) observed that private financial institutions charge
very high interest rates on credit facility with very short repayment tenor.
Nuhu (2009) remarked that the current global economy presents attractive opportunities to
purchase properties from distressed sellers. Many potential buyers are scared away by the
formidable risks that are presented by a possibly insolvent seller who may be stumbling toward
22
bankruptcy. Properties owned by distressed sellers usually come with a number of challenges
that are not ordinarily found with better-situated sellers. Efforts to stay afloat are likely to have
resulted in several layers of mortgages. There may be attachments or judgment liens resulting
from lawsuits and tax liens resulting from unpaid taxes. Properties that have had recent
construction may have incurred substantial mechanics’ liens imposed by contractors,
subcontractors and suppliers. There may be below-market long-term leases or unfavorable
supply or management contracts.
In a study by Melzer (2005) in Kenya on accessing housing finance in the low income market, it
was found that the Income Tax Act has for some time provided contributions to registered
schemes designed and established to enable savings for purchase of residences can be deducted
from gross income up to a maximum of Ksh 4,000/= per month (Ksh 48,000/= per annum). This
has been enhanced by making interest earned on deposits of up to Ksh 3 million into such a
scheme tax free. This avenue for savings and tax mitigation still remains relatively unattractive,
however, since the enabling rules and regulations are difficult for banks to abide with. As a result
one financial institution (Housing Finance) has launched a savings product for this purpose. On
the other hand, interest incurred on personal mortgages is deductible from gross income before
arriving at taxable income, subject to a limit of Ksh 12,500/= per month or Ksh 150,000/= per
annum.
In South Africa, Rust (2008) found that rising cost of capital has a dramatic impact on housing
affordability and while property prices have been rising, have decreased the amount of loan that
a low-income household is able to support. In 2004, a household earning R3500 would have
been eligible for a R101 000 loan at 11 percent interest over 20 years; in June of 2008, a
23
household earning R3500 is only eligible for a loan of about R79 000, now at 16.5 percent
interest. In 2004, a household earning R9000 per month would have been eligible for a R261 000
loan, well within the ‘affordable’ target market. Now, a household earning R9000 per month
cannot find a house to buy at the R205 000 of mortgage finance that they can afford.
In a study by Sacerdoti (2005) on accessed mortgage finance from the banks in Sub-Saharan
Africa (SSA), it was found that there is a wide concern that bank spreads are too high in Africa.
Analysis conducted in a number of studies indicated that the causes of the spreads in most SSA
banking system are high operating costs, difficulties in obtaining and using collateral, and the
absence of efficient judicial procedures to facilitate loan recovery. A detailed analysis of the
main determinants of the spreads in Kenya across different categories of banks (state-owned,
private domestic, and foreign) shows that spreads are a function of loan loss provisions and
operating costs. Specifically, state-owned banks have the highest loan-loss provisions, and
highest profit margins, which together account for almost two-third of the spread; the higher
profit margin on lending reflects the higher write-offs on loans; their overall profitability is much
lower, as indicated by the return on assets.
In a study on housing finance in Sub-Saharan Africa and focusing on South Africa, Rust (2008)
found that almost without exception, private sector developers as well as government officials
and knowledgeable experts cite the unavailability of reasonably priced and well-located serviced
land as the major constraint to the rapid expansion of housing for low and moderate income
families. For a variety of reasons, including large holdings of land by government, control of
large tracts by special private interests, poor environmental conditions and a woeful lack of
essential infrastructure such as water and sewer, private developers are forced to look at un
24
serviced land on the outskirts of most urban areas for housing sites. Because local jurisdiction
has been unable to provide for basic infrastructure, housing developers have to make provisions
for it as part of their development plans. Yet their only means to recoup the cost is through the
sale of the housing units. However, providing such necessary infrastructure can add at least 3040 percent to the sales cost of a unit, in effect pricing it well beyond the affordability capacity of
most of the originally targeted population
In Ghana, Walley (2010) reveals that the housing finance is adversely affected by the lack of
land titles, and/or the slowness in issuing them. Thus, in Ghana most lenders have been deterred
to providing housing finance to an inefficient and cumbersome foreclosure process; this has left
the Home Financing Company as the sole provider of mortgage, as this company benefits from a
more favorable legal framework. The authorities have reviewed this framework, in order to
encourage more lending by other financial institutions.
European Central Bank (2009) indicates that housing finance is of crucial importance to the
Eurosystem as housing loans constitute the largest liability of households and account for a large
proportion of bank lending. In the Euro Area, most countries have recorded significant increases
in their mortgage debt-to-Gross Domestic Product ratios over the last decade and especially in
more recent years. The average annual growth of housing loans in the Euro from 1999 to 2007
was just above 10 percent though the country patterns differ with loan growth even decreasing
slightly in Germany in year 2007. The main underlying drivers of growth in housing debt on the
supply side included the fierce competition of banks for market shares which resulted in more
diversified credit instruments becoming available at lower cost, with longer maturities and on
flexible terms (such as lower amortization requirements and higher loan-to-value ratios).
25
In yet another study on housing finance in African countries, Sacerdoti, (2005) found that with
Macroeconomic stability returning to many countries in Africa, and with implemented or
planned deregulation of the banking sector in several countries (Kenya, Ghana, Uganda, Nigeria,
Tanzania and Zambia) the liquidity situation of many of the well-managed banking institutions
in Africa has improved considerably. The availability of resources to invest in areas such as
mortgage finance does not appear to be a major constraint to increased housing production,
particularly among the large regional merchant banks such as Barclay’s Bank, Stanbic and
Standard Charter. In a number of countries, there has also been a significant “shake out” of the
banking system and increased oversight by government institutions, which has left remaining
banks in a stronger financial position.
The researcher observes that in most of the studies reviewed in this chapter, the scope of the
study is limited to only one variable. For example, a study that explores the role of cost of capital
on accessing mortgages tends to touch on other incentives in passing. The researcher intends to
fill in this gap by comprehensively looking at two incentives including repayment period and
cost of capital. The study carried out in Ghana by the International Monetary Fund (2012) on
housing finance provides useful insights as to the effect of land registration systems on access to
mortgage. However, the study does not have a developed theoretical framework where a reader
can be able to follow the line of argument of the author. In addition, the methodology used in the
study is vague. The researcher therefore recommends that a study be carried out outlining the
theories used to argue the problem of the study and the methodology used to arrive to the
conclusions. The study carried out by European Central Bank (2009) indicated that housing
finance is of crucial importance to the Euro system as housing loans constitute the largest
26
liability of households and account for a large proportion of bank lending. The study is of much
importance to the current study as it gives the reader a basis of why many people who wish to be
home owners borrow from banks to do the same; this includes the longer loan maturation period
and low cost of capital.
2.3.2 Repayment period and real estate growth
Real estate growth is in most cases influenced by the rate at which developers or households
borrow money for housing and the rate at which they repay outstanding housing loans. The less
repayment period pronounced in housing credit suggests that new loan approvals indicate net
principal repayments relative to outstanding. ECB (2009) presents that since 2004; net monthly
principal repayments have averaged around ¾ percent of outstanding credit as compared to 1
percent in previous years among European nations. There have been a number of changes in
characteristics of mortgages suggesting that the rate of scheduled principal repayments may be
lower on average than previous case. For traditional variable-interest-rate loans, the rise in
interest rates since 2002 have increased total mortgage payments but lowered the amount of the
current scheduled principal repayment (Caldera and Andrews, 2011).
MC-Donald and Thornton (2008) are of the view that households make extra repayments in
addition to scheduled mortgage repayments. While penalty fees for early repayments of principal
are often charged on fixed-rate loans and during honeymoon or introductory rate periods on
mortgages, variable-rate mortgage typically allow borrowers to make excess repayments of
principal without penalty. Although there are no precise data on the extent of excess principal
repayments, information on households survey by Pittman (2008) suggests that around one-half
borrowers make excess principal repayments and normally place ahead of schedule in their
27
mortgage repayments. While presenting a report on mortgage, Rugasira (2007) revealed that
banks indicate that roughly one quarter of the borrowers are more than a year ahead on their
mortgage repayments and around one-half are more than one month ahead. This means that
banks in Uganda benefit from the developers a head of building and construction of the real
estates and it could be a scare craw leading a few household accessing mortgages in Kampala
District.
Tuma (2006) noted that excess repayments on principle reflect deliberate efforts by developers
or households to pay their mortgages more quickly than the time required. This is likely to
increase the interest rates’ rise since the higher cost of borrowing encourages borrowers to repay
loans more quickly if they are able. However, it should be noted that higher interest costs also
reduce the capacity of some borrowers to make excess principal repayments. Borrowers’
decisions to make excess principal repayments are also affected by other factors other than
interest rates, including income growth and expectations of economic security. Expectations of
returns on other assets could also be relevant in such situations since borrowers can be attracted
to invest money in other strongly performing assets rather than making additional loan
repayments. This to a great extent determines affordability alongside the maturity. A study from
Uganda revealed that Interest rates range between 16% - 23% depending on the purpose of the
mortgage (Kibirige, 2006). Usually owner occupier mortgages take the lower rate and it increases as
one tends towards commercial mortgages. These rates are generally high and are attributable to the
lack of long term local funding. Similar study in Egypt, on mortgage lending rate revealed that the
mortgage rate equals to 14 percent with a margin of 4% over the prime lending rate (Hassanein and
Barkouky, 2008). This leaves mortgage companies with only 1.5% which needs to be further
decreased when attempting to securitize the mortgage loan and provide other guarantees.
28
According to UN-Habitat (2005), roughly one billion people, or one-third of the world’s urban
population, live in slums. And a well-functioning housing market influences not only shelter
concerns. At a basic level, country’s housing sector can improve public health (by reducing the
likelihood of outbreaks of disease), stimulate economic growth (through its own job creation, but
also as workplaces for home-based entrepreneurs), and have important social consequences (by
influencing crime reduction and citizenship).The best housing sectors should enable the adequate
provision of shelter across all segments of the population. While there are many aspects to the
housing market (discussed below), it can be argued that the provision of housing finance is a
binding constraint that must be addressed before the market can sustainably provide adequate
housing. Even in the best of environments, housing is a major purchase — average home prices
typically ranging from 4 times annual income in developed countries to 8 times annual income in
emerging economies - that is affordable only when payments can be spread out over time.
2.3.3 Mortgage default and real estate growth
Research has found that default is current loan-to-market value ratio of each property. As prices
fall, the probability of defaults rises. Unfortunately, the cost to lenders of default also rises as
prices fall. While default probabilities and default losses rise with falling prices, default losses
rise non-linearly and faster than the decline in house prices. Such dynamics means that the
mortgage holder would ideally want a non-linear or dynamic and hedge; Quigley, Robert and
Yongheng (1993) are of the view that there is no shortage of evidence on importance of home
prices and equity on the default decision. In 29 empirical studies done over a thirty year period,
Quigley, Robert and Yongheng (1993) concluded that home equity or the related measure of loan
to value ratio, influence default decision. There is a consensus in most recent default studies that
29
the correct measure of a borrower’s net equity is the contemporaneous market value of property
less the contemporaneous market value of the loan, a measure that also incorporates borrower
expectations. This negatively or positively affects real estate growth depending on the nature of
the borrower or the investment where the money has been invested.
Jackson and Kasserman (1980) reach the same conclusion there exists a significant literature
examining causes of default and their empirical effects on the growth of estates. Empirical
evidence shows that it is the house versus the mortgage value, rather than such personal
characteristics as the homeowners’ liquidity position or developers that explain default which in
short or long run affects the growth of estates. In a study by Jackson and Kasserman (ibid) in
which a discrete proportional hazard model was used, it was found that default of mortgage
finance by developers or homeowners do not only affect the banks but equally so the developers.
Results also show that the probability of negative equity ratio is the main time varying covariate
influencing mortgage holders’ default decision.
The history of the mortgage industry provides dramatic evidence that default risk is related in a
non-linear way to housing prices. Losses from default depend not only on the incidence of
defaults, but on the severity of deficiencies after collateral liquidation. Unfortunately, there are
virtually no data on aggregate claims over time which is available on a non-proprietary basis. But
this is an area where history is well known. Most studies point to the increase in credit growth as
one of the main determinants of the run up in real estate prices. Koh et al (2005) using an optionbased model of financial intermediaries found that if the value of the underlying asset falls below the
outstanding amount of a loan, the borrower may simply default on the loan putting the asset into the
hands of the financial institution. This may cause the financial intermediaries to hold excessive
amounts of unwanted real estate which in a bear market can only be disposed at prices which were
30
dramatically lower than the amount it was originally collateralized for. The banking system is the
dominant financial system in most East Asian countries where the equity and bond markets are fairly
underdeveloped (Collyns and Senhadji, 2003).
Another possible determinant of real estate price dynamics is real Gross Domestic Product (GDP)
which captures both the aggregate level of income per capita and population size (Ho and Cuervo,
1999). An increase in real GDP would increase the income of the population in the economy
resulting in increased demand for real estate through higher prices of primary property and higher
rentals. Real interest rate is also another possible important determinant. A reduction in real interest
rates can increase the prices of real estate as it reduces the cost of borrowing. Reflecting these
developments, outstanding mortgages as a share of GDP has risen dramatically, particularly among
smaller European countries (IMF, 2003). In quite a few European Union (EU) countries the
(negative) correlations between real housing prices and real interest rates have been especially high
2.4 Conclusion
It can be deduced that real estate needs appropriate amount of money to be built or developed
despite challenges therein.
31
CHAPTER THREE
METHODOLOGY
3.0 Introduction
This chapter covers research design, study population, sample size and selection, sampling
techniques, methods of data collection, data management and analysis, reliability and validity,
ethical considerations, assumptions and limitations.
3.1 Research design
A cross sectional survey research design was used for this study in Kampala District. Cross
sectional survey is a type of observational study that involves the analysis of data collection from
a population or its subset to represent the whole population such that the researcher can use the
results from the subset to reach inferences to the general population. Housing Finance Bank’
employees were majorly a population that normally gives mortgage finance from the banks and
the researcher hoped that would give accurate information in relation to the topical objectives. A
cross sectional survey research design was used because it allows the use of qualitative and
quantitative methods of research which the researcher thought would complement one another
during the study to reach at the inferences. Besides, cross sectional studies normally take a short
period of time (Amin, 2005) and the researcher hopes to carry out this research within a few
months.
3.2 Study area and population
The study was carried out onto the Housing Finance Limited in Kampala District. The District
borders with Wakiso District to the South, South and the North and by Kira Town-Council to the
East. It has been chosen because it has different developers that normally use mortgage finance
32
in buying and constructing houses. The population of study from where the sample size was
selected was 150 employees of Housing Finance Bank (HFB).
3.3 The sample size and selection
A sample size of 80 officials from the HFB was interviewed and this was determined using
Cochram (1963) formula below;
n=
Whereby
=
=
α=
the standard value from the normal distribution curve
level of significance and for research purposes
0.05 (95% confidence interval)
p = the proportion of respondents was meant to respond and give true information,
which is assumed to be equal to 0.5, q = 1 – p
e = the degree of precision/ the risk that was taken by the researcher is 0.11 was used
So, n was determined as;
= 1.96 and n =
= 79.372
80 respondents.
3.4 Sampling techniques
The study embraced random and purposive sampling techniques. Purposive sampling technique
has been used to select HFB from different banks within Kampala and the researcher hoped that
it would give needed information. Purposive sampling was used alongside random sampling
technique. Amin (2005) noted that purposive sampling technique is a method of research that
directs researcher to reach respondents with rich information in relation to the study. This is the
33
most reason that led the researcher to opt for the purposive sampling technique with the hope to
reach respondents with rich knowledge as presented in table 3.1 of this dissertation.
Table 3.1: Illustration of the sample size and distribution
Category
Population
Sample size
Sampling technique
Bank administrators
6
6
Purposive sampling technique
Credit officers
10
10
Purposive sampling technique
Bank accountants and other
134
49
Random sampling
Loans officers
23
15
Random sampling
Total
173
80
staff
Source: Research study, 2015
3.5 Sources of Data Collection
Secondary and primary sources of data collection were used during the study. Suffice, secondary
sources of data collection were used while developing the proposal and writing this dissertation.
They included text-books, Journals and News Papers among others.
Primary sources of data collection contained information extracted from the field. This was done
using Questionnaires.
3.6 Methods of data collection
A survey method was used with the help of questionnaires.
3.7 Data collection instruments
3.7.1 Self – Administered Questionnaires
Data was collected using Self-Administered Questionnaires
. Self-administered questionnaires are sets of questions usually sent by mail to the respondents
albeit they at times delivered by hands. Normally, they are delivered to various places where
34
respondents live or work from. The researcher delivered self-administered questionnaires to the
offices of HFB. The self-administered questionnaires were organized following the Likert (1932)
and Thurstone scales (Thurstone and Clave, 1929).
3.8 Reliability and Validity
Questionnaires do not emerge fully-fledged; they have to be created or adapted, fashioned and
developed to maturity after many abortive tests flights. In fact, every aspect of a survey has to be
tried out beforehand to make sure that it works as intended (Dillman, 1987). The questionnaires
were pre-tested by two different groups, namely, two researchers and two Real estate developers
to ensure that the questions cover the full range of the issues being studied. A 4-point scale of
relevant, quite relevant, somewhat relevant, and not relevant was used to assess the
questionnaires hence the questionnaires were tested for content validity. Face validity was
established by ensuring that every question or item on the scale has a logical link with the
objectives of the study.
On the other hand, reliability is defined as the extent to which a questionnaire, test, observation
or any measurement procedure produces the same results on repeated trials. In short, it is the
stability or consistency of scores over time or across raters provided by an instrument. Reliability
was tested using pre-testing data sets and Cronbach’s reliability. The reliability of the variables
was assessed using Cronbach’s alpha (1951).
3.9 Data Management and Analysis
Although qualitative and quantitative methods of data analysis were used, quantitative analysis
was used much more than qualitative. Qualitatively, descriptive analysis was used to analyze the
data alongside narrations and interpretation of the findings. After coding and entering the data in
35
the spreadsheet, analysis was performed using Computer programme – Scientific Program for
Social Scientists (SPSS). Analysis was based on different objectives in reference to different
methods as presented herewith. For the objective one which was meant to examine how accessed
mortgage finance affects real estate growth, analysis was done using the Pearson correlation and
cross tabulation; the second objective that states to analyze the effects of mortgage default on
real estate growth in Kampala District and the third which states that to examine the effects of
mortgage repayment period on real estate growth; these were analyzed using the chi-square
analysis.
3.10
Ethical Considerations
The Researcher maintained respect for persons. The researcher ensured that the participants
received full disclosure of the nature of the study, benefits and alternatives, with an extended
opportunity to ask questions hence an informed consent. The researcher guarded against
misconduct in research. The researcher did not involve himself in fabrication, falsification or
plagiarism in proposing, performing, reviewing the research or in reporting research results. The
Researcher gave forethought to the maximization of benefits and the reduction of risks that could
have occurred from the research. The researcher avoided conflict of interest by not offering
himself as a research subject.
3.12
Conclusion
This section has reviewed the research design; the procedure of carrying out the research has
been captured. The data collection methods of questionnaire and observation have been
proposed. The data analysis was done by SPSS. Face and content validity and reliability of the
questionnaires were tested. Ethical considerations were given top priority. The researcher
36
maintained respect for persons, guard against falsification and offering himself as a subject in the
research.
37
CHAPTER FOUR
PRESENTATION OF DATA, INTERPRETATION AND ANALYSIS OF THE
FINDINGS
4.0 Introduction
This chapter presents the findings from the study. It starts with the bio-data or the characteristics
of the respondents; it then gives how accessed mortgage funds from HFB affect the growth of
real estate, effects of the mortgage default in HFB on real estate and ends with the effects of
mortgage repayment period in Housing Finance Bank on real estate growth.
4.1 Bio-data of the respondents
The bio-data of the respondents composed of age of respondents, levels of education, sex or
gender as presented hereunder. One of the bio-data of respondents was gender as presented in
figure 4.1.1
Bar-chart 4.1.1: Gender of respondents
70
60
66
50
40
34
30
Percent
20
10
0
Males
Females
Gender
Source: Primary data, 2015
The information presented on figure 4.1.1 shows that majority of respondents were males as
justified by 66 percent while females were 34 percent. This means that majority of the
respondents that were interviewed in the HFB were males as compared to females. While the
38
researcher was able to conclude that most of the staff in HFB that are employed in mortgage
finance are males, he was informed that departments of loans and mortgage finance are
dominated by males. Among other reasons that the study found for this was that men are too
quick and responsive in loans and mortgage issues in relation to females. Age was another biodata of respondents as presented on figure 4.1.2
Bar-chart 4.1.2: Age of respondents
60
56
50
40
30
Percent
20
10
20
14
10
0
20-30 years
41 - 50 years
31 - 40 years
Over 50 y ears
Age range of respondents
Source: Primary data, 2015
As presented on bar chart 4.1.2, majority of the respondents were in the age range of 31 – 40
years as justified by 56 percent. 20 percent were in the age range of 41 – 50 years; they were
followed by 14 percent within over 50 years and the last having 20 – 30 years with 10 percent.
According to the bar chart 4.1.2, majority of respondents were mature enough to elucidate the
extent to which mortgage financing affect or influence the growth of real estate. He was
convinced that respondents have enough experience with the bank issues and therefore they were
able to explain the content of the subject matter in reference to the study. Education was yet
another feature of the respondents as presented in the bar chart 4.1.3
39
Bar-chart 4.1.3: Levels of educ ation
70
60
58
50
40
30
24
Percent
20
10
0
15
Diploma
Post graduate
Degrees
Others
Levels of educ ation
Source: Primary data, 2015
Respondents with degree level of education were found to be more in comparison to the rest of
the respondents. This constitutes 58 percent as presented on the bar chart. The researcher also
interviewed respondents with post graduate level of education and these constituted 24 percent.
Those with diploma were 15 percent and others had 3 (three) percent. From the information
presented on the bar chart 4.1.3, the researcher realized that these were highly educated
individuals with knowledge in reference to the research questions and objectives of the study.
The study started with an inquiry about types of the real estates that are normally developed by
the mortgages and those that developers seek finance for; and the findings are presented on table
4.1.1 of this dissertation.
40
Table 4.1.1: Types of real estates developed by mortgage finance
Frequency
2
13
54
8
3
80
Retail - space
Office - space
Residential space
Manufacturing s pace
Industrial s pace
Total
Percent
2.5
16.3
67.5
10.0
3.8
100.0
Valid Percent
2.5
16.3
67.5
10.0
3.8
100.0
Cumulative
Percent
2.5
18.8
86.3
96.3
100.0
Source: Primary data, 2015
Accordingly, 67.5 percent of the respondents supported residential space; 16.3 percent supported
office-space, 10.0 percent supported manufacturing space, 3.8 percent supported industrial space
and 2.5 percent supported retail space. This means that mortgage finance is normally acquired
for residential space in which real estate falls. Responses were also received regarding repayment
period for mortgage finance that is normally given to the people and the findings are presented in
table 4.1.2.
Table 4.1.2: Repayment period for mortgage
Less than 5 years
5 - 10 years
11 - 15 years
16 - 25 years
Over 25 years
Total
Frequency
5
38
31
3
3
80
Percent
6.3
47.5
38.8
3.8
3.8
100.0
Valid Percent
6.3
47.5
38.8
3.8
3.8
100.0
Cumulative
Percent
6.3
53.8
92.5
96.3
100.0
Source: Primary data, 2015
As presented in table 4.1.2, 47.5 of the respondents supported the view that mortgages are given
ranging from 5-10 years. They are followed with 38.8 percent of the respondents who supported
11 – 15 years. 6.3 percent supported less than 5 years while 3.8 percent supported 16 – 25 years
and over 25 years respectively. The interpretation delivered from the above table was that
mortgages are given for a short period. The researcher found that the longer the period of
41
repayment, the smaller the risks incurred onto the developers and the more the bank made
profits. Nonetheless, it was found that there was positive attitude towards mortgages as presented
on the bar chart 4.1.4
Bar-chart 4.1.4: Attitude of developers to mortgage
80
75
60
40
Percent
20
20
0
Positive
Indefferent
5
Negative
Attitudes
Source: Primary data, 2015
In accordance to the bar chart 4.1.4, 75 percent of the respondents had positive attitude towards
mortgage financing in relation to real estates, 20 percent had indifferent attitude while 5 percent
had negative attitude. However, the 75 percent is big enough to infer that in Uganda, mortgage
financing has a correlation to real estate growth. This assertion from the study is also supported
by yet quantitative findings as presented on table 4.1.3
Table 4.1.3: Mortgage finance as a best approach to fund real estate
Yes
No
Total
Frequency
70
10
80
Percent
87.5
12.5
100.0
Valid Percent
87.5
12.5
100.0
Cumulative
Percent
87.5
100.0
Source: Primary data, 2015
According to table 4.1.3, the study revealed that 87.5 percent of the respondents supported the
fact that mortgage finance is the best approach to fund real estate development while 12.5
percent objected to the view. This remained the basis for this study to support the role of
42
mortgage finance in real estate development. The researcher further asked those who supported
the view as to why they think mortgage finance is the best approach to finance real estate and it
was stated that mortgages have low interest rates, mortgages have long repayment period for the
developers, mortgages help developers without current cash, mortgages are given on the basis of
assurance that the developer or any client will pay or otherwise the security in advance stands the
risk to be sold to regain the money from the bank. It was also found that the bank attracts its
employees into real estate development and the findings are presented in table 4.1.4.
Table 4.1.4: Whether the Bank attracts its employees to real estate
development
Yes
No
Total
Frequency
72
8
80
Percent
90.0
10.0
100.0
Valid Percent
90.0
10.0
100.0
Cumulative Percent
90.0
100.0
Source: Primary data, 2015
From the table 4.1.4, the study findings show that 90 percent of the respondents supported the
view that HFB attracts employees to real estate development while 10.0 percent never supported
the view.
4.2 Research objectives
4.2.1 Accessed mortgage funds and real estate growth
One of the objectives of this study was to establish how accessed mortgage funds from Housing
Finance Bank affect real estate growth. In the first instance, the researcher found that whoever
has security and the capacity to repay according to what is normally assessed by the bank, must
get the mortgage funding for his development. The researcher went on to establish the
43
importance of mortgage fund in reference to areas of development or getting a site to develop
and the findings are presented in table 4.2.1 of this dissertation.
Table 4.2.1: Accessed mortgage finance helps in getting new construction site
Strongly dis agree
Disagree
Not sure
Agree
Strongly agree
Total
Frequency
1
3
19
51
6
80
Percent
1.3
3.8
23.8
63.8
7.5
100.0
Valid Percent
1.3
3.8
23.8
63.8
7.5
100.0
Cumulative
Percent
1.3
5.0
28.8
92.5
100.0
Source: Primary data, 2015
The information presented in table 4.2.1 shows that 63.8 percent of the respondents agreed that
accessed mortgage finance helps in getting new construction site. 23.8 percent was not sure, 7.5
percent strongly agreed, 3.8 disagreed and 1.3 percent strongly disagreed. This made the
researcher to conclude that some developers get mortgages to acquire sites in which development
of real estates is meant to take place. From the interviews with some of the bank administrators,
the researcher established that some of the real estate developers start from buying land and later
develop it into residential houses. It was also found that accessed mortgage help in paying of
workers as presented in table 4.2.2 of this dissertation.
Table 4.2.2: Accessed mortgage finance helps to pay workers
Strongly dis agree
Disagree
Not sure
Agree
Strongly agree
Total
Frequency
1
1
27
43
8
80
Percent
1.3
1.3
33.8
53.8
10.0
100.0
Valid Percent
1.3
1.3
33.8
53.8
10.0
100.0
Cumulative
Percent
1.3
2.5
36.3
90.0
100.0
Source: Primary data, 2015
According to table 4.2.2, 53.8 percent of the respondents agreed that accessed mortgage funds
help the developers to pay workers. 33.8 percent were not sure, 10.0 percent strongly agreed, 1.3
44
percent strongly disagreed and disagreed respectively. Despite the 33.8 percent of the
respondents who were not sure, the researcher found that the 53.8 percent was enough to justify
that some of developers pay their workers using the mortgage funds. The researcher further
established that the payment of the workers is part of development since such workers normally
work to develop real estate. On whether the accessed mortgage finance increase morale among
developers, the findings are presented in table 4.2.3
Table 4.2.3: Accessed mortgage finance increase morale among developers
Strongly dis agree
Disagree
Not sure
Agree
Strongly agree
Total
Frequency
1
2
28
46
3
80
Percent
1.3
2.5
35.0
57.5
3.8
100.0
Valid Percent
1.3
2.5
35.0
57.5
3.8
100.0
Cumulative
Percent
1.3
3.8
38.8
96.3
100.0
Source: Primary data, 2015
57.5 percent of the respondents agreed that mortgage finance increase morale among the
developers while 35.0 percent of the respondents were not sure. 3.8 percent strongly agreed, 2.5
disagreed while 1.3 strongly disagreed. The interpretation is that mortgage finance increases
morale among the developers into real estate. The study went further to establish if the accessed
mortgage finance increase developers assets and the overwhelming majority were in congruent
with this statement as presented in table 4.2.4 of this dissertation.
Table 4.2.4: Accessed mortgage finance increase developers' assets
Strongly dis agree
Disagree
Not sure
Agree
Strongly agree
Total
Frequency
1
2
6
47
24
80
Percent
1.3
2.5
7.5
58.8
30.0
100.0
Valid Percent
1.3
2.5
7.5
58.8
30.0
100.0
Source: Primary data, 2015
45
Cumulative
Percent
1.3
3.8
11.3
70.0
100.0
As presented in table 4.2.4, 58.8 percent of the respondents agreed with the view that accessed
mortgage finance increase developers’ assets and 30.0 percent strongly agreed. On the other
hand, 7.5 percent were not sure, 2.5 percent disagreed and 1.3 percent strongly disagreed. This
made the researcher to infer that accessed mortgage finance increase developers’ assets because
the 88.8 percent of the respondents was big enough to reach to that conclusion.
On whether
accessed mortgage finance increase on real estate growth, the findings are presented on table
4.2.5
Table 4.2.5: Accessed mortgage finance increase on real estate growth
Dis agree
Not sure
Agree
Strongly agree
Total
Frequency
1
4
42
33
80
Percent
1.3
5.0
52.5
41.3
100.0
Valid Percent
1.3
5.0
52.5
41.3
100.0
Cumulative
Percent
1.3
6.3
58.8
100.0
Source: Primary data, 2015
As presented in table 4.2.5, it is presented that mortgage finance increase the growth of real
estate. Accordingly then, 41.3 percent of the respondents strongly agreed with the statement
while 52.5 agreed. The interpretation is that 93.8 percent of the respondents were big enough to
conclude that there is a relationship between mortgage finance and real estate growth. On the
other hand however, 5.0 percent of the respondents responded with not sure while 1.3 percent
disagreed. Lastly, the researcher inquired if accessed mortgage finance attracts investors into real
estate development and the findings are presented in table 4.2.6
46
Table 4.2.6: Accessed mortgage attracts investors into real estate development
Strongly dis agree
Disagree
Not sure
Agree
Strongly agree
Total
Frequency
3
5
4
41
27
80
Percent
3.8
6.3
5.0
51.3
33.8
100.0
Valid Percent
3.8
6.3
5.0
51.3
33.8
100.0
Cumulative
Percent
3.8
10.0
15.0
66.3
100.0
Source: Primary data, 2015
51.3 percent of the respondents agreed with the statement that accessed mortgage finance attracts
investors into real estate development. 33.8 percent strongly agreed while 5.0 percent were not
sure. 6.3 percent disagreed and 3.8 strongly disagreed to the statement. According to the first
objective that led this study to be organized, the researcher was meant to establish how accessed
mortgage funds from HFB affect real estate growth. Using the findings as presented above, it
was found that it is mortgage finance that attracts investors into real estate growth basing on the
interest rate. This was supported by the respondents that the higher the interest rate the fewer the
developers seeking mortgage finance and the lower the interest rate, the higher the developers
seeking for the mortgage finance.
4.2.2 Mortgage finance default
The second objective of the study was to analyze the effects of mortgage default in Housing
Finance Bank on real estate growth. There was evidence that default of mortgage finance does
not only affect HFB but also the growth of real estate as presented in table 4.3.1
47
Table 4.3.1: Mortgage finance default hinders daily activities of HFB
Strongly dis agree
Disagree
Not sure
Agree
Strongly agree
Total
Frequency
7
12
9
44
8
80
Percent
8.8
15.0
11.3
55.0
10.0
100.0
Valid Percent
8.8
15.0
11.3
55.0
10.0
100.0
Cumulative
Percent
8.8
23.8
35.0
90.0
100.0
Source: Primary data, 2015
From table 4.3.1, mortgage finance default hinders daily activities of the bank. 55.0 percent of
the respondents agreed and 10.0 percent of the respondents strongly agreed. On the other hand,
11.3 percent of the respondents were not sure, 15.0 percent disagreed while 8.8 percent strongly
disagreed. Despite responses in disagreement, the percentage and the frequency in agreement
reveal that default of the bank mortgages hinder the daily activities of the bank. It was noted that
when the activities of the bank are affected, it means that those seeking for mortgages are
reduced and in long run reduced mortgages to the public is witnessed. On whether the default of
the bank mortgage creates employee turnover, the quantitative findings are presented in table
4.3.2
Table 4.3.2: Mortgage finance default creates employee turnover
Strongly dis agree
Disagree
Not sure
Agree
Strongly agree
Total
Frequency
10
23
24
17
6
80
Percent
12.5
28.8
30.0
21.3
7.5
100.0
Valid Percent
12.5
28.8
30.0
21.3
7.5
100.0
Cumulative
Percent
12.5
41.3
71.3
92.5
100.0
Source: Primary data, 2015
The information presented in table 4.3.2 shows that there are other factors responsible for the
turnover among employees of HFB rather than the mortgage finance default. Accordingly, 30.0
48
percent of the respondents were not sure with the statement, 28.8 percent disagreed, 21.3 percent
agreed, 12.5 strongly disagreed and 7.5 percent of the respondents strongly agreed. It was from
this perspective that the inference was reached that turnover has got other factors than the
mortgage default. Respondents mentioned issues regarding intrinsic and extrinsic motivators as
most factors leading to turnover. In such circumstances, workers remain in the system of the
bank working to gain the money of the bank from the developers. However, it was found that the
default hinders the growth of real estate despite the continued work by the employees of the
bank. This is presented in table 4.3.3 of this dissertation.
Table 4.3.3: Mortgage finance default hinders growth of real estate
Strongly dis agree
Disagree
Not sure
Agree
Strongly agree
Total
Frequency
3
9
21
41
6
80
Percent
3.8
11.3
26.3
51.3
7.5
100.0
Valid Percent
3.8
11.3
26.3
51.3
7.5
100.0
Cumulative
Percent
3.8
15.0
41.3
92.5
100.0
Source: Primary data, 2013
The findings in table 4.3.3 reveal that mortgage finance default hinders growth of real estate.
This is justified with the fact that 51.3 percent of the respondents agreed with the statement while
7.5 percent strongly agreed. On the other hand, 26.3 percent was not sure, 11.3 percent disagreed
and 3.8 percent strongly disagreed. Despite respondents who were not sure and those that
disagreed, the researcher found that mortgage default hinders the growth of real estate.
According to credit officers, it was stressed that the default creates unease among the developers
of real estates to the extent that they only work to pay; at times, they sell their assets before the
intervention of the bank and the findings to this assentation are presented in table 4.3.4 of this
dissertation.
49
Ta ble 4.3. 4: Mortgage finance de fault compels the Bank to sell assets of
de velopers
Frequency
St rongly disagree
1
Disagree
1
Not sure
7
Agree
36
St rongly agree
35
Total
80
Percent
1.3
1.3
8.8
45.0
43.8
100.0
Valid Perc ent
1.3
1.3
8.8
45.0
43.8
100.0
Cumulative
Percent
1.3
2.5
11.3
56.3
100.0
Source: Primary data, 2015
As presented in table 4.3.4, mortgage finance compels the bank to sell assets of the developers.
This is justified by 45.0 percent of the respondents who agreed with the statement and 43.8
percent that strongly agreed. 8.8 percent were not sure while 1.3 percent disagreed and strongly
disagreed respectively. While in face to face interviews with the bank officials, it was
emphasized that it is not the wish of the bank to sell the assets of developers; rather at times it is
the only option to recover the bank funds. It was confessed that despite of the default, the
administrative work of the bank cannot be jeopardized, and the quantitative results are presented
in table 4.3.5
Table 4.3.5: Mortgage finance default hinders administrative work of HFB
Strongly dis agree
Disagree
Not sure
Agree
Strongly agree
Total
Frequency
3
30
32
11
4
80
Percent
3.8
37.5
40.0
13.8
5.0
100.0
Valid Percent
3.8
37.5
40.0
13.8
5.0
100.0
Cumulative
Percent
3.8
41.3
81.3
95.0
100.0
Source: Primary data, 2015
Table 4.3.5 reveals that 40.0 percent of the respondents were not sure if the mortgage default
hinders the administrative work of HFB. 37.5 percent disagreed 13.8 percent agreed and 5.0
percent strongly agreed but 3.8 percent strongly disagreed. This means that mortgage finance
50
default has less effect on the administrative work within the HFB. Like turnover findings in
connection with the bank, the findings found that there is little effect that can be caused by the
mortgage default on the administrative work of the bank. Some administrators noted that there
are banks that function well without component of mortgage finance and such banks have been
successful. However, it was mentioned that mortgage default affects the developers’ efforts into
mortgage finance as presented in table 4.3.6.
Ta ble 4.3. 6: Mortgage fina nce de fault reduce s the finance re sources of the
de velopers
Frequency
St rongly disagree
1
Dis agree
1
Not sure
7
Agree
53
St rongly agree
18
Total
80
Percent
1.3
1.3
8.8
66.3
22.5
100.0
Valid Percent
1.3
1.3
8.8
66.3
22.5
100.0
Cumulative
Percent
1.3
2.5
11.3
77.5
100.0
Source: Primary data, 2015
Mortgage finance default reduces the financial resources of the developers and this was
supported by 66.3 percent of the respondents who strongly agreed and 22.5 percent who strongly
agreed. Despite 8.8 percent of the respondents who were not sure and 1.3 percent who strongly
disagreed and disagreed respectively, the effects of default on the financial resource of the
developers are dire as presented in the preceding table 4.3.6. On whether the mortgage default
reduces the development of the real estate, the findings are presented on table 4.3.7
51
Table 4.3.7: Mortgage finance default reduces the development of real estate
Strongly dis agree
Disagree
Not sure
Agree
Strongly agree
Total
Frequency
1
7
24
46
2
80
Percent
1.3
8.8
30.0
57.5
2.5
100.0
Valid Percent
1.3
8.8
30.0
57.5
2.5
100.0
Cumulative
Percent
1.3
10.0
40.0
97.5
100.0
Source: Primary data, 2015
Table 4.3.7 reveals that mortgage finance default reduces the development of the real estate. This
is supported by 57.5 percent of the respondents who agreed with the statement and 2.5 percent
that strongly agreed. On the other hand however, 30.0 percent of the respondents were not sure,
8.8 percent disagreed and 1.3 strongly disagreed. Therefore, Mortgage default reduces the
development of real estate. The study went further to establish the nature or how developers feel
during the defaulting period and it was established that developers found themselves stressed
during the period; quantitative results are presented in table 4.3.8
Table 4.3.8: Mortgage finance default stresses the developers
Strongly dis agree
Disagree
Not sure
Agree
Strongly agree
Total
Frequency
1
5
6
48
20
80
Percent
1.3
6.3
7.5
60.0
25.0
100.0
Valid Percent
1.3
6.3
7.5
60.0
25.0
100.0
Cumulative
Percent
1.3
7.5
15.0
75.0
100.0
Source: Primary data, 2015
The findings in the table 4.3.8 reveal that defaulting stresses developers and this is justified with
60.0 percent who agreed and 25.0 percent of the respondents who strongly agreed. They noted
that the period involves long thinking among the developers about the bank’s action to sell their
assets that had been used as security in the bank. At times developers borrow from other banks in
52
order to pay the mortgage finance and in the process accumulate the cycle of loans. On the other
hand however, 7.5 percent of the respondents were not sure, 6.3 percent disagreed and 1.3
percent of them strongly disagreed. Despite of their disagreement, they never gave reasons to
justify this.
4.2.3 Repayment period and growth of real estate
The last objective was to examine the effects of mortgage repayment period in Housing Finance
Bank on real estate growth. This according to the respondents is an important component in the
due course. Repayment period was defined as a period in which the mortgage finance given to
the developers is returned to the bank. It was noted that repayment period does not only apply to
mortgage finance but also to other types of loans in the bank. The researcher therefore
established if the repayment period creates ample time to accumulate profits for the developers
and quantitative findings are presented in table 4.4.1
Table 4.4.1: Re paym ent pe riod cre ate s am ple tim e to accumulate profits am ong
de velopers
Frequency
St rongly disagree
Dis agree
Not sure
Agree
St rongly agree
Total
1
5
20
42
12
80
Percent
1.3
6.3
25.0
52.5
15.0
100.0
Valid Percent
1.3
6.3
25.0
52.5
15.0
100.0
Cumulative
Percent
1.3
7.5
32.5
85.0
100.0
Source: Primary data, 2015
According to table 4.4.1, 52.5 percent of the respondents supported the view that repayment
period creates ample time to accumulate profits among developers, 25.0 percent were not sure
and 15.0 percent strongly agreed. On the other hand, 6.3 percent of the respondents disagreed
and 1.3 strongly disagreed. It therefore remained important that repayment period is instrumental
53
to development among developers. Such repayment period the bank normally give to developers
has been discussed under table 4.1.2 of this dissertation. It was also found that a repayment
period promotes activities for the growth of real estate and quantitative findings are presented in
table 4.4.2 of this dissertation.
Table 4.4.2: Repayment period promotes activities for the growth of real estate
Strongly dis agree
Disagree
Not sure
Agree
Strongly agree
Total
Frequency
1
1
4
50
24
80
Percent
1.3
1.3
5.0
62.5
30.0
100.0
Valid Percent
1.3
1.3
5.0
62.5
30.0
100.0
Cumulative
Percent
1.3
2.5
7.5
70.0
100.0
Source: Primary data, 2015
According to table 4.4.2, 62.5 percent of the respondents agreed with the view that repayment
period promote the activities for the growth of the real estate and 30.0 percent strongly agreed.
Although 5.0 percent was not sure, 1.3 percent disagreed and strongly disagreed respectively, the
researcher was convinced that 92.5 percent in agreement was big enough to justify the extent of
different activities that normally take place during repayment period. Among others, respondents
noted that during the period, developers construct residential or other estates, pay their workers
and above all collect rental from the tenants as they repay. It was also noted that repayment
period allows planning for the real estates among the developers and this is presented in table
4.4.3
54
Table 4.4.3: Repayment period allows planning for real estates
Strongly dis agree
Disagree
Not sure
Agree
Strongly agree
Total
Frequency
2
5
18
51
4
80
Percent
2.5
6.3
22.5
63.8
5.0
100.0
Valid Percent
2.5
6.3
22.5
63.8
5.0
100.0
Cumulative
Percent
2.5
8.8
31.3
95.0
100.0
Source: Primary data, 2015
According to the information in table 4.4.3, 63.8 percent of the respondents agreed with the
statement that repayment period allows planning for the real estate and 5.0 percent strongly
agreed. 22.5 percent of the respondents were not sure, 6.3 percent disagreed and the 2.5 strongly
disagreed. Therefore, among activities that developers normally do is planning as presented in
table 4.4.3. It was also found that repayment period allows consultations with the stakeholders
of the bank as presented on table 4.4.4
Table 4.4.4: Repayment period allows consultations with the stakeholders
Strongly dis agree
Disagree
Not sure
Agree
Strongly agree
Total
Frequency
3
6
31
38
2
80
Percent
3.8
7.5
38.8
47.5
2.5
100.0
Valid Percent
3.8
7.5
38.8
47.5
2.5
100.0
Cumulative
Percent
3.8
11.3
50.0
97.5
100.0
Source: Primary data, 2015
According to the information presented in table 4.4.4, 47.5 percent of the respondents agreed
with the view that repayment period allow consultations with the stakeholders. 38.8 percent was
not sure, 7.5 disagreed, 3.8 disagreed and 2.5 strongly agreed.
55
4.3 Mortgage finance and growth of real estate
The study went further to follow the topical presentation in establishing the relevance of
mortgage finance to the growth of real estate. One of the questions asked to respondents was to
state whether mortgage finance lead to real estate growth and 100 percent of the respondents
supported this assertion. While explaining this assertion, respondents stated that the bank
normally restricts developers or clients seeking for mortgage finance on the development of
houses or real estate rather than any other activity. In further justification, the researcher asked
whether mortgage finance increase the rate of development of real estate and the findings are
presented in table 4.5.1.
Table 4.5.1: Mortgage finance increases the rate of real estate development
Strongly dis agree
Disagree
Not sure
Agree
Total
Frequency
1
1
64
14
80
Percent
1.3
1.3
80.0
17.5
100.0
Valid Percent
1.3
1.3
80.0
17.5
100.0
Cumulative
Percent
1.3
2.5
82.5
100.0
Source: Primary data, 2015
The information presented on table 4.5.1 shows that mortgage finance increases the rate of real
estate growth. Accordingly, 80.0 percent of the respondents were not sure with the statement,
17.5 percent strongly agreed, 1.3 percent disagreed and strongly disagreed respectively. On
whether mortgage finance is better than loans, quantitative findings are presented on table 4.5.2.
56
Table 4.5.2: Mortage finance is better than loans in developing real estate
Dis agree
Not sure
Agree
Strongly agree
Total
Frequency
3
6
56
15
80
Percent
3.8
7.5
70.0
18.8
100.0
Valid Percent
3.8
7.5
70.0
18.8
100.0
Cumulative
Percent
3.8
11.3
81.3
100.0
Source: Primary data, 2015
According to the findings presented in table 4.5.2, 70.0 percent of the respondents agreed with
the statement and 18.8 strongly agreed. 7.5 percent was not sure and 3.8 percent disagreed. This
thus supported the view that mortgages are better than loans; since the study was carried out
among the employees of HFB, the researcher was convinced with the result. On whether
mortgage finance suits the conditions in Uganda, the findings are presented on table 4.5.3
Table 4.5.3: Mortgage finance suits the conditions in Uganda
Strongly dis agree
Disagree
Not sure
Agree
Strongly agree
Total
Frequency
2
2
5
56
15
80
Percent
2.5
2.5
6.3
70.0
18.8
100.0
Valid Percent
2.5
2.5
6.3
70.0
18.8
100.0
Cumulative
Percent
2.5
5.0
11.3
81.3
100.0
Source: Prima data, 2015
As presented on table 4.5.3, 70.0 percent of the respondents agreed with the view that mortgage
finance suits the conditions in Uganda and 18.8 percent strongly disagreed. 6.3 percent was not
sure, 2.5 percent disagreed and strongly disagreed respectively.
4.4 Statistical analysis to the findings
The researcher went further to analyze the findings using the chi-square analysis in which the
research questions therein was perceived as hypothesis. For example, the research question one
57
which states that: What are the effects of the accessed mortgage funds from Housing Finance
Bank on real estate growth? Under the hypothetical or assumptions, it was taken as: There are
significant effects of the accessed mortgage funds from Housing Finance Bank on real estate
growth. Statistically, the information supporting that there was significance has been presented
on table 4.6.1 of this dissertation.
Table 4.6.1: Test Statistical significance about accessed mortgage finance to the growth of real estate
Chi-Square a,b
df
As ymp. Sig.
Significance of the
access ed mortgage
finance in getting new
construction site
108.000
4
.000
Significance of the
access ed
mortgage finance
in paying workers
85.250
4
.000
Significance of
access ed mortgage
finance in increasing
developers ' ass ets
96.625
4
.000
Significance of the
access ed mortgage
finance increase on
real es tate growth
63.500
3
.000
a. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cell frequency is 16.0.
b. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cell frequency is 20.0.
Source: Primary data, 2015
The second research question seeks to establish the effects of mortgage default in Housing
Finance Bank on real estate growth and statistical findings have been presented on table 4.6.2
with the hypothetical or assumption that:- there are positive significant effects of mortgage
default in Housing Bank on real estate growth.
58
Table 4.6.2: Test Statistics significant effects of mortgage finance default in the HFB on real estate
growth
Chi-Square a
df
As ymp. Sig.
Mortgage finance
default hinders
daily activities of
HFB for real
es tate growth
62.125
4
.000
Mortgage finance
default hinders
growth of real
es tate
60.500
4
.000
Mortgage finance
default hinders
administrative work of
HFB
49.375
4
.000
Mortgage finance default
reduces the finance
res ources of HFB to
support real estate
growth
119.000
4
.000
a. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cell frequency is 16.0.
Source: Primary data, 2015
The same analysis was used to establish how significant were the effects of mortgage repayment
period in Housing Finance Bank on real estate growth and statistical significance have been
presented in table 4.6.3 of this dissertation.
Table 4.6.3: Test Statistics for the significance of repayment period to HFB on real estate growth
Chi-Square a
df
As ymp. Sig.
The repayement
period fevours
the developemt
of real estate
88.625
4
.000
Repayement
period creates
ample time to
accumulate profits
from real es tate
65.875
4
.000
Repayement period
promotes activities
for the growth of
real es tate
113.375
4
.000
Repayement period
allows planning for
the real estate
105.625
4
.000
a. 0 cells (.0%) have expected frequencies less than 5. The minimum expected cell frequency is
16.0.
Source: Primary data, 2015
Using the statistical tests presented in tables 4.6.1, 4.6.2 and 4.6.3, the researcher reached at the
inference that there were significances in relation to the hypothesis delivered from the research
questions used.
4.5 Conclusion
It can be concluded that mortgage finance has positive results in the development of real estate
despite various challenges that could be resulting. Even, such challenges are created as bank
59
officials attempt to get more profits. In doing so, they increase the interest rate which in long run
affect the performance of real estate among developers.
60
CHAPTER FIVE
DISCUSSION OF FINDINGS, CONCLUSION AND RECOMMENDATIONS
5.0 Introduction
This chapter presents the discussions of the findings basing on the findings and research
questions. It should be noted that the mothers of thought about mortgage finance perceived the
view having found that mortgages were significant to the growth of real estates, acquiring land
and houses as well. Due to different moderates and need for profits in the process, what was
perceived to be accruing from the bank fail to take place. It was from this that the researcher
went on to establish the effects of mortgage finance on real estate growth using a case study of
Kampala District.
5.1 Discussion of Findings
According to chapter one, the dissertation had three research questions in which the headings
hereunder were delivered from.
5.1.1 Whether there is an effects of accessed mortgage funds on real estate growth
While assessing and establishing the effects of mortgage funds on real estate, the researcher
found that mortgage finance is important basing on the areas of development as presented in
table 4.2.1 in which 63.8 percent of the respondents agreed with the statement. It was also found
that mortgage finance is instrumental in meeting various expenses and workers in particular. This
is in congruence with the research study by Hoek-Smith (2011) in Nigeria where it was found
that mortgage finance led developers into different results such as construction of different
houses and real estate. Other effects of mortgage finance on the growth of real estate is that
accessed mortgage finance helps in paying the workers and this was supported 63.8 percent of
61
the respondents. Such effects were found in congruence with different studies that preceded this
study. For example, in effort to fast the work of affordable homes, the World Bank (2012)
presented that accessed mortgage finance is influential in purchasing affordable houses. It also
attracts the market forces in different directions. For example, the World Bank (ibid) reveals that
when developers access little finance and construct small houses amidst of increased population,
the demand for houses increases and this increase prices from the populace. The reverse is true to
this argument. According to Boleat (2002), a strong mortgage market widens financial system.
Although this is true, it remains contrary to the findings of this study because it was found that
very few financial institutions have taken the role of mortgage finance and this means that the
market base still needs to be widened up.
5.1.2 Whether there is an effects of mortgage default on real estate growth
The analysis to the findings of this study revealed that there are significant effects of mortgage
default as presented in table 4.6.2. In accordance to the findings, it is revealed that mortgage
default hinders the growth of real estate although workers can continue working with the banks
in which developers get mortgages from. Besides, workers under developers of real estate cannot
continue in process despite the continuation of the workers from the banks. These discussions
support the arguments advanced by Koh et al (2005) while analyzing the option-based model of
financial intermediaries and the underlying asset falls. The scholars advanced that for mortgages to
be beneficial to the public, developers and financial institutions must avail what they have to their
clients. The findings however do not agree with the assertion that the market forces must be the
ruling force rather than entities, individuals and objects; falls under Collyns and Senhadji (2003) who
noted that the banking system in most East Asian countries is the dominant financial system where
equity and bond markets are fairly underdeveloped. This applies to Ugandan case and Kampala
62
District in particular where this study was carried out. It was found that due to the need of more
profits, banks normally decrease repayment period and this affect the developers seeking for funds. It
was also found that default creates unease among the developers of real estates to the extent that
they only work to pay mortgage finance rather than developing themselves and instituting
development on the ground. This according to the findings on table 4.3.4 was supported by 88.8
percent.
5.1.3 Whether there an effects of mortgage repayment period on real estate growth
Lastly, the study established the extent how banks determine the repayment period and according
to the findings; determining the repayment period is an important component in reference to the
growth of real estate and the bank itself. According to the quantitative findings, table 4.1.2,
reveals that the findings although the repayment period is enough, it is not good enough to the
developers of real estate. This according to Kibirige (2006) is an important factor considered in
appraising viability of a mortgage application by developers among others. Like the finding
presented by this study, the scholar observes that Uganda lacks financial institutions that lack
strong muscles to support the development of real estate. It is due to this reason that banks such
as the Housing Finance Bank have short periods of repayment than the long periods. It is from
such circumstances that the researcher had to infer that among other factors for the continual
existence of housing crisis in Kampala has been due to the situation created within the banks
background.
Despite of such assertion, the findings reveal that the repayment period creates an ample time for
accumulation of profits among the developers. This was supported by 67.5 percent of the
63
respondents as presented in table 4.1.1. 92.5 percent also supported that repayment given to
developers allow the developers to carry out activities related to real estate growth.
5.2 Conclusion
Basing on the finding and statistical analysis presented in this chapter the researcher concludes
the study by asserting that the influence of mortgage finance is still influential in regard to
housing and construction. Like the mother of the idea of mortgage finance and the last scholars
who found mortgage finance instrumental not only to houses or real estate development, the
researcher concludes that despite the challenges found in using the mortgage finance as
presented in this study; if appropriate means and procedures are laid down for the case of
Uganda, better results are likely to be achieved and the housing crisis is likely to be an issue of
the past. It is from the finding and conclusion of this format the researcher has to recommend as
presented herewith.
5.3 Recommendations
The findings of the study present various effects of accessed mortgage finance from the Housing
Finance Bank. Imperatively, it was found that the process for getting finance requires various
items such as the securities; it is from this that the researcher calls upon the bank to create a
process of constructing houses or real estate to be sold to individuals who can afford raising the
money to buy houses yet they do not have securities to be used in getting mortgage finance. This
approach can increase houses in Kampala District but will also increase a number of individuals
owning houses. The bank needs also to use a soft but restrictive approach while reclaiming the
funds from such groups; this will in short and long run increase clients to the bank. Besides, it
64
was found that although mortgage finance is appropriate and important to the growth of real
estate in Uganda and Kampala District in particular, not all people can access it due to failure to
qualify. The researcher found it imperative for the bank to involve the Government of Uganda,
the Ministry of Lands, private entities and individual persons in the process of constructing and
acquiring houses if the process is to benefit majority nationals. The involvement of such bodies
will in short and long run clears the road that would lead to increased payment to the bank and
remove the existing defaults to the bank.
The study also found positive effects of the bank mortgage in Kampala despite the fact that most
people do not have access to them. This calls the banks involving in mortgage business to
increase on sensitization of mortgage finance to the general public in Uganda and Kampala
District in particular. In such sensitization, the mode should be put on the profits that developers
accrue in involving in the real estate development and growth and the simplistic nature of the
bank alongside long standing period to repay mortgage finance loans. In such approach, banks
will attract not only existing developers to continue in the system, but will attract new developers
in the system and the whole process shall be gorgeous
Basing on the findings of this study, the Housing Finance Bank needs to increase the repayment
period to its clients from only 10 years to 25 years and beyond. This will in the first instance
increase the number of developers into the construction of real estate in Uganda and Kampala
District in particular. Secondly, with the increase in number of developers of mortgage finance,
banks will receive recommended number of clients and this shall increase on the profitability and
liquidity of the bank. In the due course, developers will construct different houses in Kampala
District and Uganda in general and the crisis shall be an issue of the past.
65
5.4 Areas of further Research
Opportunities for further research also exist in the area of investigating mortgage systems in
developed countries with the aim of adopting the process that contributed to their efficiency.
Such studies can help to shed light on specific steps that boost mortgage system in Uganda.
This study assessed only the influence of mortgage financing yet there are other factors that
affect real estate growth such as government policy and legislation, macroeconomic environment
and land tenure system. These could be looked at with a larger sample space in lieu to the nature
of the developers in using such mortgage money.
66
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69
Appendices
Appendix A
Self- administered questionnaire to respondents
Dear respondents
This is an academic study and all information collected shall be utilized purely for this purpose.
You have been carefully selected to participate in this study because of your wealth of
experience in this area and your response will be handled with utmost confidentiality. Thank you
for taking time to record your insight on the subject.
(Tick where appropriate)
SECTION A
Background formation
Male
1. Gender:
Below 20
2. Age (in years)
Female
20-30
31-40
41-50
Over 50
3. Highest level of Education
O/A Level
Diploma & certificate
Degrees Post-Graduate
Other (Specify)
4. What type of real estate developers do normally give mortgage finance?
Retail-space
Office Space
Residential
space
Manufacturing
space
5. You normally give mortgage of how many years?
Less than 5 years
5-10 years
11-15 years
15-25 years
Industrial space
Over 25 years
6. What is the attitude of the developers to the mortgage finance?
Positive
Indifferent
Negative
7. In your opinion, do you think mortgage finance is the best approach to fund
developers of real estate?
70
Yes
No
Give reasons to support your answer
…………………………………………………………………………………………………………
8. Does the bank attract its employees to get involved in real estate development?
Yes
No
Give reasons to support your answer
………………………………………………………………………………………………………
9. How does the bank attract the public into real estate development?
…………………………………………………………………………………………………………
SECTION B
Accessed mortgage funds from Housing Finance Bank and real estate growth
Use the following to answer the question:
1 = Strongly disagree, 2 = Disagree 3 = Not Sure
4 = Agree
5 =Strongly agree
1 2 3 45
12
13
14
15
16
17
18
19
20
21
22
23
Accessed mortgage finance helps developers to get new construction site
Accessed mortgage finance helps developers to pay its workers
Accessed mortgage finance increases morale among developers
Accessed mortgage finance leads to developers’ growth
Accessed mortgage finance helps in increasing developers’ assets
Accessed mortgage finance helps in increased real estate
Accessed mortgage finance is effectively used than finance from other sources
Accessed mortgage finance attracts more investors to real estate development
Accessed mortgage finance leads to growth of estates in Kampala
Accessed mortgage finance influences developers to invest in houses
Accessed mortgage finance increases developers morale to invest
Accessed mortgage finance is the only way to increase capital of NHCC
24. Is there other way through which accessed mortgage finance affects real estate growth?
a) Yes
b) No
Explain your answers
……………………………………………………………………………………………………
71
SECTION C
Effects of mortgage default in Housing Finance Bank on real estate growth
In a situation of mortgage defaults, use the table below to agree or disagree with the
statement
1 = Strongly disagree, 2 = Disagree
25
26
27
28
29
30
31
32
33
34
3 = Not Sure
4 = Agree
5 =Strongly agree
1 2 3 4 5
Mortgage finance default hinders daily activities of HFB
Mortgage finance default crates employee turnover
Mortgage finance default decreases morale of the workers
Mortgage finance default hinders the growth of HFB
Mortgage finance default makes the banks to sell assets of developers
Mortgage finance default hinders administrative work in the bank
Mortgage finance default reduces the finance resources of HFB
Mortgage finance default reduces HFB development
Mortgage finance defaults negatively affects the growth of banks’ assets
Mortgage finance default stresses HFB creditors
36. What are other effects of mortgage defaults with the HFB?
…………………………………………………………………………………………………
SECTION D
Effects of mortgage repayment period in Housing Finance Bank on real estate growth
Use the following answers as provided to agree or disagree with the statements in the table
below.
1 = Strongly disagree, 2 = Disagree
3 = Not Sure
4 = Agree
5 =Strongly agree
1 2
35
36
37
38
39
40
41
42
The repayment period favours the development and growth of estate
The repayment period creates ample time to accumulate profits
The repayment period is shorter than what is expected
The repayment period promotes activities for the growth of real estate
The repayment period allows planning for real estates
The repayment period gives developers to plan for other resources
The repayment period is essential for the growth of the bank
The repayment period allows consultations with stakeholders
72
3
4
5
SECTION E
Mortgage finance and real estate growth
43. Mortgage finance lead to real estate growth
a)
Yes
b)
No
Explain your answer
………………………………………………………………………………………………………
44. Are there mortgage finance defaults with HFB?
a)
Yes
b)
No
If so, explain the banks action to recover the money
………………………………………………………………………………………………………
If no, explain how the HFB has been able to avoid such
………………………………………………………………………………………………………
45. State the repayment period of mortgage finance within HFB
………………………………………………………………………………………………………
46. Are there many people accessing mortgage finance under HFB?
a)
Yes
b)
No
Explain your answer
………………………………………………………………………………………………………
Use the following answers as provided to agree or disagree with the statements in the table
below.
1 = Strongly disagree, 2 = Disagree 3 = Not Sure 4 = Agree 5 =Strongly agree
1 2
47
48
49
50
51
3
4
5
Mortgage finance increases the rate of real estate development
Mortgage finance attracts investors into real estate development
Mortgage finance is better than loans in real estate development
Mortgage finance is a good approach for conditions in Uganda
Mortgage finance is a basis for investment in real estate
Thank you for your cooperation
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