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The Ugandan real estate market is a dynamic and promising arena for property developers and agencies. With its growth potential and an ever-increasing demand for real estate, it's no surprise that international agencies are eyeing Uganda as a destination for expansion. However, in this blog post, we'll explore the challenges that these international agencies face when trying to make their mark in the local Ugandan market.

I recently had a conversation with a new international property developer on the Ugandan market who's in a hurry to sign exclusive agency agreements with international agencies in Uganda to market his properties. The twist here is that he plans to phase out local agents in favor of international ones. This approach might seem like a strategic move, but it's not without its pitfalls.

The International vs. Local Conundrum.

While some international agencies boast global clout and name recognition, they often struggle to make an impact in the local market. They tend to demand higher commission rates, which can be beyond the local market average, and yet, they often fail to sell real estate projects or individual properties within a reasonable time frame.

One key reason for their struggle is that the Ugandan market operates differently from those in other parts of the world where many of the international companies originate and thrive. In Uganda, they often find themselves unable to expand and thrive beyond their initial size, instead shrinking to a basic single office operation. Additionally, the cost of acquiring these franchises can be exorbitant, and some may lack the flexibility needed to adapt to the unique demands of the local market.

There are lessons to be learned.

A client of mine who owns a real estate agency in Uganda was planning to expand his investment foot print bring the Century 21 real estate franchise into the local market a few years ago. I cautioned him to conduct thorough research to determine if international franchises were genuinely suitable for our small local unregulated real estate market.

 

I believed that the current presence of international franchises in Uganda was sufficient and that there was no room for more. My advice to him was reinforced when a competing franchise entered the market ahead of him and, instead of expanding from more than a dozen initial locations, the new franchise instead shrank to just one location in a span of just one year. This served as clear lesson that the local market couldn't efficiently accommodate numerous international agencies simultaneously.

 

The operational practices deployed by many of these international agencies are simply not well-suited for an unregulated real estate market like ours. For instance, the requirement of sole agency, which is often insisted upon by these agencies, doesn't sit well with most landlords.

 

Those landlords who have agreed to sole agency arrangements have frequently expressed regrets, especially when the exclusive agent fails to collaborate or share the property with a wider pool of agents. Ironically, it's often these additional agents who ultimately succeed in selling the properties held exclusively. Furthermore, the high standards established by these agencies often exceed the practical reach of a substantial portion of our market, particularly since a significant number of real estate transactions involve individuals with lower incomes.

Market Immaturity and Infrastructure Challenges.

It's important to recognize that while Uganda's real estate market is growing rapidly, growth alone doesn't equate to maturity. When compared to established international markets, Uganda's market maturity may be overrated due to its delayed start that was initialy caused by the nation's history of wars and political instability.

Moreover, our real estate market grapples with infrastructural issues, leading to flooding in parts of the city and poorly maintained roads riddled with massive potholes. These challenges make certain roads impassable during the rainy seasons, affecting property accessibility and value.

Insights from a Local agent.

Before writing this blog, I had the opportunity to discuss these challenges with Simon Shana of Ajayad Consult, a seasoned real estate agent in the local market. Simon shared his observations, highlighting that the organic nature of the local market sets international agencies in direct competition with local counterparts. Unlike their international counterparts, local agencies operate at significantly lower costs while delivering the necessary sales for developers and landlords.

 

Simon emphasized that for real estate franchising businesses to succeed in Uganda, founders should start by establishing their own branches as a proof of concept before offering franchises to investors. On the flip side, local agencies need to enhance their organization, professionalism, and adherence to standards to stay competitive.

A Case Study and an Unfortunate Closure.

As a case study, I shared with Simon my observations with a local agency that was once located on Mawanda Road in Kampala. This agency's front office setup mirrored the presentation style of real estate agencies in the United Kingdom, impressing me with its curb appeal and exotic posture. However, to my dismay, I recently discovered that the agency had closed its doors, and its online presence had disappeared. This raises more questions about what went wrong and why promising local and international agencies struggle in our market.

I'm eager to uncover the reasons behind the agency's closure because it could provide valuable insights into what can be done to improve the local market. I had initially reached out to them to list their properties on the RED, emphasizing our need to work with professional agencies that project a professional image. However, they chose to navigate our relatively small market independently, which may have been one of their weaknesses, among other issues yet to be uncovered.

The Importance of Local Marketing portals.

Any local or international real estate agency in Uganda that neglects local marketing portals like the RED, Lamudi Uganda, or Realtor Uganda may encounter difficulties in reaching its target audience effectively or may miss out on solid/qualified leads. These local portals have been around for a long time, and thus they possess in-depth knowledge of the market's intricacies and challenges. They can provide valuable guidance, helping local and international agencies navigate the market's unique hurdles.

 

These portals also hold a top-ranking position on Google's search engine results when it comes to local property searches. Given that Google is often the first destination for property buyers seeking comparative information on real estate, these platforms are exceptionally well-placed to enhance the visibility of listings from both local and international agencies. Additionally, these portals provide valuable backlinks, contributing to the enhancement of Search Engine Optimization (SEO) and the overall ranking for those who choose to list their properties with them.

 

The absence of numerous international real estate agencies from local online portals may partly explain why they often fail to appear in Google search engine results for local property and location searches. This is compounded by the fact that Google currently places significant emphasis on local Search Engine Optimization (SEO) practices.

In conclusion.

 

While the Ugandan real estate market holds promise and potential for growth, international agencies need to navigate it carefully, considering the unique challenges it presents. Understanding the market dynamics, partnering with local experts, and leveraging established local marketing portals can be crucial steps toward success. As the market continues to evolve, it's essential to adapt and learn from the experiences of those who have ventured into this vibrant, yet complex, landscape.