For years, real estate has been positioned as the ultimate investment as it’s considered tangible, dependable, and constantly appreciating in value.However, over time,Uganda’s capital markets now offer competitive returns, and in some cases, safer than brick-and-mortar investments while in contrast, traditional construction loans (mortgages) remain out of reach for the average Ugandan, primarily due to high interest rates and rigid repayment structures. So what if the path to financing your dream didn’t start at the bank but rather in the capital markets?
This is where “Building with Bonds” comes in! A fresh, strategic way to think about home financing by unlocking the tools already available in Uganda’s financial ecosystem.
Ways of financing your home in Uganda through Capital Markets
Investment through Unit Trusts (Secondary Market)
Unit trusts allow investors to pool money and invest in a diversified portfolio of bonds, treasury bills, and equities. These are a great avenue if you would rather hire a fund manager to invest on your behalf.
Currently NEST Uganda (construction firm) has a Save & Build Program that works with the unit trust model to support home construction. With returns from unit trusts averaging 10% per annum, this model offers a way to grow your savings steadily over time before committing to building.
Use Coupon Payments to Build
Long-term bonds, especially 5-, 10-, and 15-year treasury bonds, come with semi-annual coupon payments. This income can be strategically reinvested or allocated to fund the incremental payments through a trusted unit or building fund of a home instead of borrowing to-build.
🔗 Read more on compounding coupons in this breakdown
Bonds as Collateral for Loans
What many don’t realize is that government bonds can be used as collateral when applying for loans.Bonds are often even preferred to physical properties as they are more liquid and are generally considered less risky, this leads to better interest rates and favorable terms when negotiating for a construction loan.
Beyond the Bank: Why It’s Your Job to Get a Good Deal
Let’s face it, traditional financing for housing in Uganda is broken. Interest rates on construction loans often in the double digits are unsustainable. But this isn’t just a banking problem, it’s a financial literacy problem. While banks will always protect their margins and manage risk, you have the power to secure better deals through financial education and proactive investing.
What’s Next?
In upcoming NEST Conversations, we’ll break down:
- Tools for first-time investors
- Case studies of Ugandans who funded homes without a bank loan
- Step-by-step guides on investing through bonds and unit trusts
It’s time to build smarter, not just harder. Let’s turn bonds into bricks.
Subscribe to NEST Conversations for more insight on navigating homeownership. Let’s Build smarter, one bond at a time.
