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Gov’t Explains Strict Conditions for Investors Mortgaging Gov’t Land

The Minister of Lands, Housing and Urban Development Betty Kamya has given an explanation as to why Cabinet approved stringent covenants and conditions for investors mortgaging Government land.

The Cabinet sitting at State House Entebbe on Monday approved the covenants and conditions for mortgaging Government land by investors.

Government will now require investors to present documentary evidence of financial capacity to fully use land, the capacity schedule highlighting the milestones for the first 18 months duly broken into deliverables for every 6 months and written commitments that the milestones will be met, and where the investor fails, land is withdrawn.

Speaking to reporters at Uganda Media Center on Wednesday, Kamya said some investors had started selling Government land given to them for free.

In consonance with the Government policy of private sector led economy, the Government embarked on a vigorous program to attract investors through various incentives and one of them was to offer free land to prospective investors who presented business plans that are in line with Government programs.

“However, there are some investors who have used this privilege in many ways including selling Government land while others have mortgaged Government land and not necessarily invested the borrowed money into agreed business prospects,” Kamya said.

The abuse of this privilege by investors, she said, defeats Government purpose of facilitating investment thereby affecting job creation, increase tax base and technology transfer among others.

“Investors have changed land use without notifying Government. In others, land remains unutilized but encumbered, putting it at risk of fore closure. The Government therefore approved the covenants and conditions for mortgaging Government land by investors,” she said.

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BELOW IS THE FULL LIST OF APPROVED COVENANTS AND CONDITIONS.

LAND APPLICATION

The investor will have to first submit the investment license issued by Uganda Investment Authority (UIA), the business plan articulating detailed project idea, documentary evidence of financial capacity to fully use the land, preliminary architectural layout of proposed facilities, application for investment land to the relevant Government entity with a copy of certificate of registration or certificate of incorporation, memorandum and articles of association and the activity schedule highlighting key milestones for the first 18 months duly broken into deliverables for every six months.

Others include; the written commitment that milestones will be met and where the investor fails, land is withdrawn, detailed business plan, proposed total amount of investment in US dollars, ability to raise funds to implement the project, expected project impact on the the economy, alignment of the proposal with National Development Plan, the amount and nature of land (acreage) that shall be required for the project, evidence of the investor’s track record and the anticipated impact of the project on the environment.

TERMS AND CONDITIONS FOR LEASING GOVT LAND

No investor shall be allowed to take possession of the land without a valid lease agreement and any allocation of land for which a lease agreement has not been signed by the investor within a stipulated period shall revert back to Government and will be available for allocation of other investors.

The lease agreement shall be signed within one month following it’s approval by Government.

The effective date of land allocation is the day lease agreement is signed.

The investor shall take possession of land within a period of six months from the date lease agreement is signed.

The investor shall forfeit the land of possession is not effected within a stipulated period.

Possession means starting to prepare the land for the planned development in line with what approved business plan.

TERMS AND CONDITIONS FOR MORTGAGING THE RIGHT TO USE GOVT LAND.

The investor should possess a valid lease agreement on Government land, the investor should not change land without consent from Government and change in land use shall be allowed by the Minister responsible for lands with approval from Cabinet.

The Cabinet also resolved that Government should allow investors to mortgage their property including lease agreement but added that for an investor to qualify to mortgage Government land should have invested/ developed at least 50% of the declared investment capital and needs funds for completion or expansion or operationalization of the investment.

The required 50% of total value of the declared investment capital referred to herein above shall however be determined by the office of the Chief Government Valuer or any other independent accredited valuer whose report shall be examined and approved Chief Government Valuer.

The financial institutions shall formally request for consent from Government with respect to mortgaging the right use of land by the investors stating clearly that they understand the terms and conditions in the relevant legal framework. Where the investor fails to pay, the financial institution shall be entitled to take over the lease under it’s terms and conditions.

The certificate of mortgage addressed to the specified financial institution shall be issued within one month after the leasing authority is satisfied that the investor has complied with the covenants and conditions.

In the event of default by the investor and subsequent foreclosure, the Bank shall notify the leasing authority. The leasing authority and the financial institution shall concurrently source for a new investor on similar terms and conditions of the lease agreement. However, the Bank’s choice will be given preference.

In case both the leasing authority and the financial institutions fail to identify new investor for the same land use, the Government may change the land use in accordance with physical planning Act to attract a new investor and in case the financial institution fails to comply with the set covenants and conditions, Government shall re-enter the land.

The Cabinet also resolved that Government shall maintain a register of approval to mortgage the lease in line with terms and conditions.

The Cabinet also decided that land ownership remains with Government.

In regards to foreign investors, a Land Use Rights Certificate (LURC) shall be issued by the Minister of Lands, Housing and Urban Development to investor in consultation with the leasing authority at the time of acceptance of the lease offer.

In addition to the restrictions to change the land use, an investor shall not transfer, sublease or subdivide the allocated land except with consent from Government in consultation with the leasing authority.

Foreign investors will only be allowed to own leasehold tenure, allocated lease term of 49 years but with renewable upon expiry and shall be allowed to mortgage developments on land they have invested at least 60% of investment capital value.

In regards to local investors, a Land Use Rights Certificate (LURC) shall be issued by the Minister of Lands, Housing and Urban Development to the investor in consultation with leasing authority at the time of acceptance of the lease offer.

In addition to the restrictions to change the land use, the investor shall not transfer, sublease or subdivide the allocated land except with consent form Government in consultation with the leasing authority.

Local investors shall be allocated leases with no provision of conversion to freehold tenure.

For a local investor to get a mortgage, they should have invested at least 30% of the Investment capital value.

Once a mortgage is processed and granted to an investor, the mortgaged land or properties shall be published in the Uganda Gazette.

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