Uganda is short roughly 2.4 million housing units, and even the government’s own housing strategy doesn’t promise to close that gap. It only aims to shrink it to 1.9 million by 2030. In 2025, lawmakers passed the Mortgage Refinance Institutions Act and the Building Control Act, both designed to bring cheaper, longer-term financing into housing and push mortgage rates down.
On the surface, Uganda should be a magnet for property investment because demand is enormous and supply is nowhere close to meeting it. Instead, the market is moving the other way. Developers complete one project and exit rather than reinvest. Bank financing rarely trickles down to ordinary home buyers. And a legal structure that has existed on paper for nearly a decade has never been used by a single company.
Consequently, the core issue isn’t a lack of housing demand, but a tax and financing system that extracts money from property at nearly every stage while offering little support to people trying to buy or invest in it.
Taxed at every turn
Property ownership in Uganda accumulates tax obligations continuously, from acquisition to disposal. Buying land triggers stamp duty and registration fees. Transactions can bring capital gains tax and withholding tax of 6.0 percent to 10 percent, plus value-added tax (VAT) of 18 percent depending on classification.
Construction adds import duty on materials and withholding tax owed to contractors. Rental income is taxed differently depending on whether the owner is an individual or a company, and when the property is eventually sold or transferred, capital gains tax applies once more.
‘So, in short, tax never really leaves the picture,’ Mr Ronald Kalema, a partner and head of tax practice, AF Mpanga Advocates, said in a discussion about the subject organised by the firm, adding that ‘throughout the cycle of the property ownership journey, there are taxes to think about.’
This kind of layering of multiple taxes along one chain of activity is damaging because the taxes compound. Economists understand that a transaction tax discourages buying and selling, a construction tax discourages building, and a disposal tax discourages exiting. Stacked together, they push investors toward inaction.
Inflated construction costs
Even setting taxation aside, building in Uganda is unusually expensive. A cement import ban meant to protect domestic manufacturers has instead produced something close to a monopoly.
‘At the moment, if you want to buy a bag of cement in Uganda, you’re paying $10 per bag,’ Marc Du Toit, the head of retail at Knight Frank Uganda, a property management firm, said. ‘Anywhere else in the world, you’re paying $5.’
And because Uganda is landlocked, imported materials pass through neighbouring countries’ ports and borders, adding about 30 percent in transport costs. Combined, Mr Du Toit said, construction here costs ’40 percent to 50 percent… higher than any of our neighbours.’
‘In Dar es Salaam and in Nairobi, a product of a studio apartment sells for $69,000 (Shs272m),’ he said. ‘In Uganda, that exact same product is on the market for $130,000 (Shs513m),’ he added.
Land ownership compounds the problem, though this one is more fixable. Because holding vacant land carries no cost, ‘land sits in a very select few hands,’ Mr Du Toit said, and those owners ‘are only willing to create liquidity in the market if they get their specific price.’
The problem is that when there’s no penalty for leaving an asset idle, owners feel no pressure to develop or release it. A tax on unimproved land value is one of the rare policies most economists broadly endorse, precisely because it can’t be avoided simply by doing nothing.
Land insecurity is also worsening. Reported fraud cases jumped from 397 in 2024 to 663 in 2025, a 67 percent increase, according to official police files, undermining investor confidence in titles.
Costly loans, for more than one reason
Layered on top of expensive construction is expensive borrowing. Shilling-denominated loan rates hovered near 19 percent through 2026, reaching about 18.73 percent in February, compared to just 11 to 13 percent in Kenya and Tanzania.
Part of the blame falls on large borrowers who exploit court delays to avoid repayment. Banks are businesses, not charities, so defaults by a few big borrowers push up borrowing costs for everyone else. This is risk-pooling working against the market, since lenders price loans on average risk across all borrowers rather than individually.
But that’s not the full picture. Bank of Uganda’s Governor Michael Atingi-Ego recently told a House committee that elevated rates also stem from heavy government borrowing, which competes with businesses and individuals for the same pool of domestic credit. He also noted that government delays in paying its own bills force businesses to borrow just to stay afloat, and some then struggle to repay, adding further strain to bank balance sheets.
In effect, part of the risk premium landlords absorb exists because the government is simultaneously competing for loans and delaying payment of its own bills.
Mr Du Toit estimates investors earn only 4 to 5 percent pre-tax returns on residential property in Uganda, versus 12 to 13 percent in comparable regional markets, a gap wide enough to send capital elsewhere.
A tax code that penalises proper structuring
Some of the dysfunction is self-inflicted.
‘As an individual, I pay 12 percent of my income as property tax,’ Mr Du Toit explained. ‘My dividends are tax-free… Now I take that same property, and I put it into a corporate structure. Effectively, my taxation rate is 30 percent.’
This discourages formal, well-governed corporate investment and violates a basic tax design principle and yet it is thought that taxation should be neutral regarding business structure.
Uganda’s system isn’t, and predictably, people choose whichever structure minimises their tax bill.
‘What is happening in the market,’ Mr Du Toit said, ‘is you’re seeing people syndicate… Uganda Revenue Authority (URA) is collecting their 12 percent, but there’s no governance, there’s no proper corporate structure.”
Mr Kalema pointed to the fact that Uganda has no legal framework for family or investment trusts, unlike Kenya, so ‘a family has to set up a company… even if that company is not really a trading company.’
The REIT that never launched
Nowhere is this disconnect clearer than with Real Estate Investment Trusts (REITs), which let ordinary investors buy shares in large properties much like buying stock in a company. Uganda’s Capital Markets Authority finalised REIT regulations back in 2017. Nine years later, not one has launched.
Developers still depend on personal capital or short-term bank loans, precisely the financing gap REITs were meant to close. The obstacle is a single tax rule. Before a REIT can sell even one unit to one investor, the property must first be legally transferred into the trust. URA treats this as a cash sale, even though no money changes hands, and charges roughly 1.5 percent stamp duty on the property’s value upfront, a bill that scales with value and kills the economics before the REIT gets off the ground.
Kenya has already scaled this hurdle. Transfers into a Kenyan REIT are tax-exempt, the REIT itself pays no income tax, pay-outs aren’t taxed again, and the transfer skips value-added tax (VAT) entirely.
Uganda has actually built half of a workable policy already. A REIT that distributes at least 80 percent of its income to investors is exempt from tax on that income, reasonable next to the 90 percent thresholds used in the UK, Singapore, and the US. The catch is that no REIT has ever survived the entry tax long enough to benefit.
Notably, the Stamp Duty Act already waives duty for construction materials tied to industrial parks and free zones with $50 million-plus commitments, and exempts land transfers linked to government-approved strategic investments. This is proof that the taxman has already shown willingness to forgo stamp duty revenue for the right goal. That flexibility just hasn’t reached REITs.
Taxing revenue instead of profit
Uganda’s income tax system generally taxes profit, revenue minus costs, but rental income is treated differently.
‘I think rent, for rental tax, there is an embedded assumption you’re going to make a profit and you can’t tell us otherwise,’ Mr Kalema said.
‘For an individual, don’t tell us whether you took a mortgage and you’re paying Shs100,000 in mortgage costs, give us our 12 percent,’ he added.
A revenue-based tax behaves very differently from a profit-based one. It applies even to properties barely breaking even, potentially turning a marginal investment into a loss purely due to how the tax is structured.
Mr Du Toit connected this to what he called a flawed assumption: ‘the perception… is that landlords are wealthy… and let’s take from the golden goose.’
Fixing compliance
Rental tax provisions change more frequently than almost any other part of Uganda’s Income Tax Act.
‘If you look at what informs the amendments, it is usually the compliance of the players in the market,’ said John Mugaga, supervisor Real Estate Tax Office, Domestic Taxes Department at URA, pointing to landlords who under-declare income or mix up cash and accrual accounting to their advantage.
URA’s response has been EFRIS, the electronic invoicing system now being extended to property.
‘EFRIS is not a tax,’ Mugaga stressed. ‘It is just a conduit… through which the property owner and the URA reach the right tax,’ he added.
Mr Du Toit disagreed. ‘You cannot write a policy around a handful of illegal operators,’ he said, adding, ‘we are minimising the ability of the country to generate income.’
There’s a broader principle here. Raising revenue by taxing a small group heavily, versus a large group lightly, tends to cause less economic distortion.
Restricting deductions across the board to catch a handful of non-compliant taxpayers penalises honest filers without meaningfully curbing informal activity.
What should change
None of this requires Uganda to overhaul its tax code. It needs rebalancing.
Mr Du Toit’s central recommendation is to begin taxing currently exempt categories like owner-occupied homes and vacant land; a holding cost on idle land, he argued, ‘will create liquidity’ and ‘growth.’
Mr Mugaga proposed cutting stamp duty, currently 1.5 percent, for first-time home buyers. Mr Kalema’s ask is fewer, clearer, more predictable rules.
For REITs, a template already exists: exempt only transfers into licensed trusts that meet the existing 80 percent pay-out requirement, with a cap or sunset clause so URA isn’t permanently forgoing revenue on an unproven market.
Investors aren’t avoiding Uganda because demand isn’t real, but because owning property there, from acquisition through construction, financing, rental, and eventual sale, carries more in tax, interest, and friction than the market can sustain.