Government has watered down concerns raised by some landlords in the wake of the passing of the Landlord/Tenant bill, insisting it is irrational for landlords to charge their tenants in U.S dollars when most of the transactions in real estate are done in local currency.
The Minister of Lands, Betty Amongi said this in a statement issued Friday in which she gave clarity on some of the clauses that have since prompted concerns.
The Bill which was passed by Parliament on June 20 restricts payment of rental fees to Uganda Shillings.
During the debate on the bill, many legislators vehemently rejected the provision for tenants to pay rent in foreign currency, saying that tenants do not have the power to negotiate with the landlord to charge rent in Ugandan Shillings.
They said payment in U.S dollars would undermine efforts to support the economy. However, some property owners have since expressed displeasure in this particular provision citing the frustration of the Shilling and the loans they acquire in U.S dollars.
Minister Amongi said on Friday that the issue of currency was in light of national sovereignty and “in pursuit of macro economic development and stability”.
“All countries globally developed or developing, entrench settlement of charges across all sectors in their local currencies. Internationally, rent is negotiated in dollars and then exchanged in local currency,” she said.
She said that where as government recognizes the argument by landlords that they borrow in dollars to construct houses and therefore should be allowed to charge in dollars, there are other sectors that transact in U.S dollars but later compute their prices into the Ugandan Shilling.
The Minister cited Ugandans who import goods from abroad (China, India, Dubai, Japan, Turkey etc) which are purchased using foreign currencies. However, on importation, these products are sold in Uganda Shillings.
She also cited medium and large scale investors operating in Uganda like Shoprite, Game, Toyota, shell, Total who equally import using foreign currency but convert their costs in Uganda shillings and sell to the Ugandan market.
“All foreign contractors engaged in government works like Infrastructure development, oil and gas import machinery and other inputs in foreign currency and transact in Ugandan currency”.
Among says the construction industry relies on locally available inputs such as local building materials like cement, tiles, sand and roofing sheets purchased using local currency and labour for construction procured using local currency.
“This means that the construction industry or real estate industry largely anchors on transactions done in Ugandan shillings”.
“We therefore find it defeating for the landlords to oppose charging rent in Uganda shillings when the other sectors of the economy that depend on transactions in local currency are operating normally”.
The other contentious clause is that which prohibits the landlord from increasing rent above 10% annually.
Among said this is a global practice in countries like Germany, UAE, S. Africa, the USA, Canada and Asian countries where rent rate can not be increased by more than 5% in their regulations.
The rationale is based on the annual inflation rate of the countries. Therefore, according to the Minister, the role of government in stabilizing the economy is of vital concern such that the housing sector does not increase inflation in the country.
The Minister as well elaborated on the issue of protecting tenants from annoyance by landlords is based on the principal that when someone rents a premise, he/she should be given privacy and should enjoy peaceful occupation.
“This provision is meant to deter this and protect the tenant from harassment by the landlord and it’s clearly defined in the law”.