Banks Move to Crack Down on Substandard Real Estate Developers After Diaspora Property Outcry Following widespread diaspora complaints, Ugandan banks under Uganda Bankers' Association are introducing stricter reforms to hold property developers accountable.

Ugandan Banks have responded to growing concerns from the diaspora community over the quality of real estate developments financed through mortgages, announcing a raft of reforms to protect buyers and ensure accountability among property developers.

In a statement issued by the Uganda Bankers Association (UBA) Chairman, Mr Julius Kakeeto, the financial institutions under the UBA umbrella acknowledged complaints from diaspora clients who have invested in properties, sometimes remotely, only to receive substandard or non-compliant buildings.

“We fully appreciate that hard-earned money from diaspora workers or indeed anyone should never go to waste through substandard property developments,” Mr Kakeeto, while delivering a keynote speech yesterday at the Uganda Bankers’ Conference themed on remittances at the Kampala Serena Hotel.

Uganda receives over USD 1.4 billion annually in diaspora remittances, according to Bank of Uganda data, of which a significant portion of this money is channeled into real estate either through outright purchases or mortgage-backed loans facilitated by local banks.

The diaspora community has long raised red flags about the lack of oversight in property development, citing cases of unfinished homes, inferior construction materials, and developers who vanish after transactions are completed.

These issues are compounded by the difficulty diaspora buyers face in monitoring projects or seeking recourse from thousands of kilometers away.

Mr Kakeeto noted that banks will move to take additional measures beyond the reliance on professional entities within the real estate value chain such as architects, engineers, surveyors, insurers, and local authorities like NEMA and urban planning bodies,

UBA member banks are proposing to increase the liability period for developers to two years, ensuring they are responsible for any structural or quality issues discovered after the customer takes possession of the property.

To foster continued responsibility, banks are pushing for developers to remain active members of condominium boards beyond project completion.

This, UBA argues, will ensure developers stay involved in the management and maintenance of the properties they build.

Recognizing the knowledge gap for diaspora investors, banks will assign dedicated advisory teams to guide diaspora clients through property transactions. These teams will provide information on construction regulations, buyer rights, and mechanisms for legal recourse in the event of disputes.
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UBA is also signaling a tougher stance on errant developers, promising enforcement of reprimand clauses within existing contractual frameworks.

In a parallel development that adds urgency to diaspora concerns, three major real estate developers are still under active investigation for the Inspectorate of Government over allegations of shoddy workmanship.

The three companies; Universal Multipurpose, Fakhruddin Properties, and Comfort Homes Limited are under investigation over structural defects in Kampala’s booming suburbs of Naalya, Najjeera, Kireka, and Kungu.

The probe, triggered by complaints from both local and diaspora buyers, is being conducted by a special committee comprising experts from the IGG’s office, the Ministry of Lands, and the National Building Review Board.

Key findings from an IGG report published in August, 2024, point to non-compliance with building codes, cracks in walls and foundations, inadequate plumbing, absent fire escapes, and substandard safety features—with Swan Residency in Kireka and Leo Zodiac Apartments in Najjeera singled out for severe deficiencies.

At Swan Residency, cracks in load-bearing columns compounded by an underground swimming pool raise serious structural integrity concerns.

Meanwhile, residents at Leo Zodiac reported chronic leaks, flooding, and mold.

The investigation also unearthed cross-directorships between Universal Multipurpose and Fakhruddin Properties, raising concerns about accountability.

Despite red flags from IGG’s office, the developers continued to market new projects to diaspora buyers, with glossy advertisements for apartments priced between UGX 100M and UGX 400M.

A full IGG report is expected soon and may guide enforcement actions including penalties against the implicated developers.