Did the national budget come to the ghetto?

COMMENT | HEWETSON AINEMBABAZI | Uganda’s structural housing deficit stands at approximately 2.4 million units, according to the Ministry of Lands, Housing and Urban Development (MLHUD) strategic plan IV, with a targeted reduction to 1.9 million units by 2030. The Uganda National Household Survey (UNHS) data reports over 28 percent of dwellings with non-durable walls (mud and poles) and about 69 percent with non-durable floors (earth or rammed earth).

Under the National Housing Policy (2016), housing is classified as affordable if a household spends no more than 30 percent of its gross monthly income on housing expenses, a threshold currently exceeded by most households. The acquisition cost for affordable housing is currently benchmarked at US$20,000 (approx. UGX 75 million), a cost that has pushed nearly half the urban households into the rental market, with a slum occupancy already hovering at 60 percent.

Recent housing-related legislation such as the Mortgage Refinance Institutions Act (2025), the Building Control Act (2025), and the Valuation Act (2024) has been designed to bring long-term liquidity into the banking market, quality assurance in building and permit issuances, eliminate erratic property pricing, and lower mortgage interest rates.

Similarly, the upcoming Real Estate Agency and Management Bill aim to eliminate unethical broker practices to attract institutional investors into real estate. However, the UGX 84.4 trillion FY 2026/27 national budget introduces a striking contradiction within the country’s housing strategy with a tax code that directly raises the baseline cost of construction, rent and home acquisition.

The Excise Duty (Amendment) Act, 2026 increases tax on cement, adhesives, grout, and lime from UGX 500 to UGX 750 per 50 kg bag. It also introduces a protective excise duty on paints and varnishes, taxing local products at UGX 50 per litre/kg and imports at a steeper UGX 2,000 per litre/kg. In addition, Parliament also approved a UGX 200 per litre increase on petrol (rising to UGX 1,750) and diesel (rising to UGX 1,430), amidst the already hiked fuel prices of about UGX 6,700 due to the Middle East conflict that disrupted oil supply routes.

This exponentially increases the cost of in-house production because cement factories are highly energy (fuel) intensive. Furthermore, transport costs affect every stage of the real estate supply chain, and this fuel levy creates an inflationary ripple effect as materials move from factories to retail hardware stores countrywide.

Combined with a doubling of the stamp duty on land transfers from 1.5 percent to 3 percent, these measures immediately raise the cost of ground-up development. The introduced tax reliefs like doubling the VAT registration threshold to UGX 300 million to shield small-scale hardware dealers, may not offset the overall inflationary pressures on formal construction.

The 2026/27 budget measures are likely to widen this housing gap, with distinct impacts especially on slum dwellings in urban areas. The National Housing and Construction Corporation (NHCC) has several large-scale low-cost designs ready for implementation, including 15,000 units at Kireka-Kasokoso and 10,000 units at Bukerere. However, the cost of materials may slow these projects down, likely forcing NHCC to revise their budgets for already-commissioned works.

For rural communities, the measures are likely to encourage continued reliance on temporary, non- durable building materials, which undermines the government’s efforts to systematically upgrade rural housing conditions.

The FY 2026/27 budget underscores the persistent challenge of balancing short-term revenue mobilisation with long-term infrastructure goals. While the MLHUD has provided the legal framework to address the country’s housing deficit, the broader fiscal policy leaves private developers to navigate higher material and transport costs, a financial burden that ultimately rests on the final consumer.

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The writer is a research associate at EPRC