HOW SACCOS CAN INVEST IN UGANDA’S COMMERCIAL REAL ESTATE

The number of Savings and Credit Cooperative Societies (SACCOs) in Uganda has grown tremendously in recent years. According to the Uganda Co-operative Savings and Credit Union Ltd, there are over 1,368 registered SACCOs in the country. An even greater number of unregistered SACCOS exists, with members making regular deposits.

This goes to describe the incredible financial power possessed by these organizations. However, whenever I have interacted with members of such organizations, a familiar problem has always come up during the conversation—a lack of lucrative investible opportunities that can generate better returns for members.    

Looking through the listed companies on Capital Markets Authority Uganda, you will find very few alternatives for investment. The other investment options available are Government bonds, treasury bills, and fixed-income accounts in banks and insurance companies.

Apart from these, many Ugandans invest in real estate. Whether individually or through savings groups, people flock to areas on the outskirts of the cities to buy pieces of land, hoping to benefit from appreciation. SACCOs have invested heavily in buying chunks of land to subdivide and sell, either to members of the general public. This is how they have been able to generate some form of return for their members.

Buying and selling land has been popular because it is straightforward. With minimal risk, even the least adept managers can make sound decisions on land purchases and sales. However, this strategy yields minimal returns over a long period. If members realize that they can get better returns elsewhere, they will not be incentivized to save more. After all, the point of saving is not just to have a pile of cash that you can look at, rather it is to accumulate enough money to employ on projects with larger impact.  

One way SACCOs can improve member’s returns is by taking on commercial real estate projects.

In Uganda, such projects have predominantly been reserved for wealthy individuals to take on. Nevertheless, with the power of collective effort, SACCOS now wield considerable resources that put them at an advantage to commission big commercial real estate projects.

Moreover, with their kind of organization and longevity, they are in a good position to create partnerships within themselves to raise capital for very ambitious projects. These projects could include high-rise condominium property, organized living projects in gated communities, office buildings, retail shopping centers, and industrial and warehousing facilities, to mention but a few.

The main challenge SACCOs face is the lack of technical know-how to pursue such an investment strategy. They would need the help of a real estate asset management firm like Baros Group Limited to guide and steer them through the investment process. Asset management Companies acquire and manage commercial real estate on behalf of their clients. They are a long-term strategic partner, who actively manage the property portfolio to maximize returns and minimize risk.

Here is how SACCOs would benefit from working with a real estate asset management company.  

1.      The members’ returns will be maximized-;

Asset managers work with the main objective of maximizing returns. They emphasize this from the project conception stage, acquisition, management, and even disposition. All decisions are made with the creation of maximum value for the client in mind. They will advise on the market trends, property types, and locations that will yield maximum gains. They also manage the properties on a daily, coordinating tenants and making sure the property does not lose value.

2.      Risk of loss will be minimized-;

Another key element of asset management is protection against risk. By taking a proactive approach, an asset management company will ensure that the investment is protected against both systemic and unsystematic risks. They will take out insurance for properties, ensure a diversified portfolio, and do all the necessary hedging to ensure that the allowed risk is worth the return.

3.      Investment will become easier-;

 Investing in real estate can be cumbersome, often requiring expertise and diligent effort at the different stages of the process. Managers of Savings and Credit Co-operative Societies usually do not possess the necessary skills or experience to manage such investments. On the other hand, real estate asset management companies employ professionals in various fields related to real estate. An array of finance practitioners, architects, construction managers, property managers, and legal consultants will be at your service to ensure that you get things right at every step of the journey.

4.      Access to information-;

 Asset managers maintain accurate and timely information about the properties’ performance. This data includes both historical performance and future projections, which is helpful when making decisions. They ensure that their clients receive this information as regularly as required, giving you a sense of control over your investments.    

How SACCOs can get started on hiring an asset management company.

The first thing to do is to conduct research and due diligence about the asset management company you would like to work with. Several asset management companies have positioned themselves to make sure SACCOs can invest in Uganda’s commercial real estate. Reach out to them for initial meetings, and have them make presentations to your investment committee or your members to get buy-in. It is also important to reach out to some of the individuals or organizations that have worked with the asset manager previously to establish how they have performed.

When you are satisfied with the first stage, you can then engage the asset managers further on how to go ahead with the business relationship. It is also advisable to start with less engaging consultancy services that they have to offer. This will enable you to learn more about how the firm operates and how you can work together. Baros Group Limited offers a variety of services that you can start with as you build on to further engagements.

To learn more about investing in Uganda’s Real Estate industry, visit https://www.barosgroupltd.com/

About the author;

Benard Sonko is a real estate investment manager and founder of Baros Group Limited. For comments and inquiries, you can reach him on +256742140251 or info@barosgroupltd.com