Government sets tough conditions for investors seeking to mortgage public land

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The government of Uganda has issued strict guidelines for investors seeking to mortgage public land. This, according to a statement issued by Minister for Lands, Housing and Urban Development Hon. Beti Kamya, is due to the tendency of some investors to abuse the privilege of ‘free’ land given to them by government, a privilege not only in tandem with the government policy of a Private Sector led economy but also one that acts as an incentive to investors.

According to the new conditions announced in a press statement by Hon. Beti Kamya, all investors seeking to mortgage government land must possess a valid lease agreement on the land signed between the investor and government. Land ownership however remains with the government.

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Investors are also required to have invested or developed at least 50 percent of the investment capital, which will be determined by the office of the Chief Government Valuer or any other independent accredited valuer whose report is to be examined by the Government valuer. Funds sought are thus to be for completion, expansion or operationalization of the investment, the guidelines read in part.


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Foreign investors who can acquire land only under leasehold tenure (a requirement in tandem with Article 237 of the constitution) must have invested at least 60 percent of the investment capital value as a prerequisite to mortgage the land. Local investors on the other hand should have invested at least 30 percent according to the statement by the Minister.

The guidelines also forbid change in land use by investors except with permission from government through the Minister for Lands with consent from cabinet and require financial institutions seeking to engage with investors to obtain consent from government. This consent is obtained through a statement by the financial institution asserting that they have properly understood the terms and conditions in the relevant legal framework.

These institutions, according to Kamya, are also entitled to take over lease ownership from investors where the investors fail to pay but this must be in accordance with the terms and conditions of the lease agreement. Following the processing and granting of the mortgage to the investor, the new guidelines require mortgaged land or properties to be published in the Uganda Gazette, the official government publication containing  government communications to the public.

Section (3) of the 2009 Mortgage Act allows a person holding land under any tenure to mortgage his or her interest in the land. However, according to Hon. Kamya, some investors have been mortgaging government land and failing to invest the borrowed money in the agreed business projects while others have changed land use without notifying the government hence the need for government to roll out these guidelines and conditions.


 

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Benjamin M. Ahikiiriza is the founder of thelegalreports.com. He is also its Chief Editor and writes about legal news.

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