Kampala Capital City Authority has embarked on an overhaul of its property register in an effort to increase revenues from property rates and levy higher fees on less compliant developers. The database will also be a useful reference tool for other local authorities seeking to revise property tax rules.

The project involves installation of an electronic property database, remapping of various commercial zones, recruitment of surveyors, maintenance of data collection devices and other field related expenses. It began last month and will be completed after two years at an estimated cost of Ush8 billion ($2.3 million).

The city property register is projected to expand to 250,000 properties after the overhaul exercise. The growth is expected to translate into overall property revenues worth Ush65 billion ($18.7 million) per year compared with current collections of Ush25 billion ($7.2 million) per annum.

Under the existing commercial laws, local governments are required to review property registers every five years. The last city property survey was carried out in 2009, KCCA sources said.

While commercial buildings are eligible for inclusion in the property register, the law exempts unoccupied commercial structures and premises used by property owners for residential purposes.

Plans to amend the property rates law could result in limited use of residential properties by their owners, with the latter restricted to a single recognised home address instead of several residences allowed under the current legal regime. This is expected to minimise revenue losses tied to undocumented commercial properties.

Rental values of existing commercial buildings will be updated while new premises will be added to the City property register during the overhaul exercise.

Regular changes in rental prices of several commercial buildings experienced in the past have led to increased bills for many tenants but these adjustments are yet to feed into property rates assessments, a factor that has led to indirect revenue losses for the City authorities, experts claim.

For instance, rental charges at prime office buildings such as Workers House gradually rose to an average of $24 per square metre by end of 2014 though they declined sharply last year due to low demand for office space caused by a surging dollar and diminished activity in the oil and gas industry.

New commercial buildings, including Rwenzori Towers, Umoja House, UAP Nakawa Business Park, DFCU Towers, Acacia Mall and Bugolobi Village Mall alongside several downtown shopping malls have been constructed in Kampala since 2009, but these are yet to be captured on KCCA’s property register, thereby creating huge revenue losses.

“We shall apply rental values in computation of property rates and not market value because the former yields a lower cost for property owners. This assessment method also boosts growth of property taxes as the economy picks up and the construction sector gathers momentum,” said Sam Serunkuuma, KCCA’s director for revenue services.

The official assessment rate will also remain at six per cent, while the survey zones will be divided into (‘A’) and (‘B’) to distinguish between uptown and downtown properties and to establish fair benchmark rental values, Mr Serunkuuma added.

The current KCCA property register contains roughly 127,035 commercial properties but only 60,000 properties are remitting property rates — largely because of several exemptions granted for residential purposes and some unoccupied premises gazetted by the City Authority, sources said.

Property taxes account for 30 per cent of KCCA’s total revenues, this figure is projected to increase to 50 per cent following review of the City’s property register.

The assessment rates for property taxes lie between six and 12 per cent according to the existing law, with local authorities free to choose their preferred rate in the above range.