According to Professor Mahmood Mamdani, the African dream is to have one wife, two cars, three children and a four bedroom house.
In Uganda, almost every bank has a mortgage plan for any couple with a desire to own a home. A few other banks have invented the “Land loan” for low income earners that desire to acquire land.
Majority of the people in their 20s and 30s who rush to buy land and construct a family home do so because they want to stop “wasting” money on rent. That’s rather sad, because home ownership isn’t always the right answer.
Why Do People Rent Today?
In Africa, most people rent because they cannot afford to buy or construct a house.
House prices in most African cities are just too high. Even for those that can get mortgage financing, the interest and monthly payments are quite restrictive.
If you want a mortgage to buy or construct a 20 million shillings house in Uganda, over a period of 15 years, you’ll need to part with 312, 063 shillings per month. That’s 56 million in 15 years.
Remember, 90% of the people in the capital and suburbs are either lower middle class or the urban poor. Most of them don’t earn enough to save up and build or buy a house, but they also can’t keep up with the terms of mortgage financing. So, generally, the primary reason most Africans rent is because they lack the financial resources to buy or construct a house.
Why are the rich also choosing to rent?
In Africa, a house and car are strongly linked to one’s financial status. It’s largely because most of us come from poor families.
If you were born poor, owning a home is the best way to prove to society that you’re not poor any more. In fact, the greatest gift you can ever give to an African parent, is building them a house or buying them a car.
For the rich however, home ownership doesn’t matter. The rich don’t have to prove to anyone that they’re rich.
They are smart investors. They don’t view owning a home as a sign of wealth. They care more about growing their cash flow streams.
So they don’t mind renting. They can afford to buy a house but they would rather invest the money.
Poor people on the other hand feel the need to buy or construct a house as soon as possible, so that their kids would have a place to call home. So that their parents and society would take them seriously.
In Africa, if you don’t have a house of your own, society doesn’t take you seriously. Regardless of how rich you are.
Renting is not a waste of money
For the rich, renting a house is like renting a taxi. You’re getting a ride in exchange for your money. So they don’t view renting as a waste of money.
They are never in a rush to build or buy a house. They are always focused on growing their businesses and building numerous cash flow streams.
If you’re in your 20s or 30s, you don’t need to break your back, trying to find money to buy a plot of land. You should be concerned about multiplying your income. Keep renting if you’re still earning and learning. There’s lots to learn about money when you’re young.
Don’t use your savings to buy land or build a house. Use it to invest in yourself and your business. Build a house only when your income is stable. Remember, your home is not an investment.
Renting will give you time to plan the life you want to live. It will give you time to design your dream home. And once your income has grown to satisfactory levels, then you can start thinking about building or buying a house. You should build a house with your passive income, not earned income.
In Uganda, a sizable number of people believe that it’s important to build a house early, because when you die prematurely, then your family won’t be thrown out on the streets. They will have a safe haven. A place to call home.
If you’re thinking that way, you’re thinking like a poor man. The rich don’t worry about such things. The rich worry about cash flow streams. If you’ve grown as many cash flows as you can, it won’t matter if you die without building a family house. Your family will lack for nothing if the cash flow is good.
I challenge you to think like the rich.
