Tanzania: Sh42bn up for Grabs in Housing Scheme

Aug 2010
Dar es Salaam, Tanzania, August, 28 2010 - About Sh42 billion ($30 million) has been injected to ease Tanzania’s housing shortage which is currently estimated at two million housing units.

A Pan-African Real Estate Development facilitator- Shelter Afrique has set aside the funds, to be made available to private real estate developers and financial institutions, to carry out the construction of about 600 housing units.

This money adds to a Sh56 billion ($40 million) soft loan from the World Bank issued in March this year to develop the housing mortgage finance market through the provision of medium and long-term liquidity to mortgage lenders.

“Money is not the problem; we encourage developers to come up with good housing projects and will provide them with soft term- loans,” said the Shelter Africa managing director Mr Alassane Ba in Dar es Salaam on Thursday.

The firm offers a 10 years tenure loan with interest rate of at least 10.5 per cent depending on the nature of the project.

The funds are expected to add to government’s recent efforts to end the serious housing shortage in the country.

To start with, the government sought to formalise the nascent mortgage industry by enacting vital acts including the Mortgage Financing (Special Provisions) Act No. 17 of 2008 and the Unit Titles Act, 2008.

In response already five banks have started paying issuing housing loans.

In order to facilitate banks to access long term finance for housing the government in collaboration with the World Bank are in the process of establishing mortgage liquidity facility to be known as Tanzania Mortgage Refinancing Company (TMRC).

The World Bank then came in and injected the Sh56 billion to develop the housing mortgage finance market through the provision of medium and long-term liquidity to mortgage lenders.

Shelter Afrique has already been supporting housing projects in the country for nearly a decade now and has so far funded about four projects including a 260-units Boko housing project in Dar es Salaam run by the National Housing Corporation. The other is Bahari Beach Satellite Town undertaken by Integrated Property Investments Ltd.

The company works in 42 African countries, with Tanzania owning 300 shares, has been involved in financing public-private-projects and social housing projects in two of its member countries namely Kenya and Mali. It has been in operation for 28 years.

According to Mr Alassane, last year, the company had about $26 million housing loan portfolio in Kenya as compared to $13 million portfolio in Tanzania.

“We want to increase that,” he said adding that under current strategy, the company targets middle income residential real estates where a demand is insatiable.

Currently the housing industry in the country is underdeveloped, with players blaming high interest rates and a limited resource funding for long term projects, being biggest challenge available.

“We face a housing deficit of about two million…we have a huge demand for credit finance to meet the high and increasing demand for housing which at the moment is estimated to be nearly 3,000 units per year,” said the minister of Lands, housing and human settlements when opening the Shelter Afrique workshop held on Thursday in Dar es Salaam.

He said the shortage was quite a challenge to the ministry citing the need for huge financial investment by players to finance housing through mortgage loans.

The housing finance has been one of the priorities of the Tanzania government.

“It is our expectation that eventually all banks will go into mortgage financial business and make dreams of many people to own a home come true,” he added.

Mr Chiligati said the formation of a mortgage liquidity facility- Tanzania Mortgage Refinancing Company (TMRC) has completed and the company would start operations early next year.

Five local banks have already subscribed to the company and formed a Board of directors. The board was currently in a process of recruiting the chief executive of the company and other senior executives, he said.

With the seed capital of Sh56 billion from the World Bank the firm expects to raise the needed additional capital by issuing bonds to the market.

It will enable banks to access long term housing loans at a relatively low interest rate, and consequently the same banks will extend long term loans to their customers.

He mentioned the banks; Azania bank, Tanzania Investment Bank, Exim Bank, CRDB and National Microfinance Bank.

“The aim is to put in place and promote a housing micro finance system that will make housing loans accessible micro finance system that will make housing loans accessible to the disadvantaged, specifically the low income groups in our society,” said the Captain Chiligati.

However, analysts warn that the well functioning mortgage financing system should go together with new house construction or else the anticipated situation might influence demand for housing to go upward so that the few available houses would become expensive.

Real estate developers and financial institutions in the country have been a bit hesitant to take large scale housing projects due to several challenges.

One of the challenges includes the prevailing high interests rate, which at the moment ranges between 17 to 20 per cent per year.

“The main challenge to us as financial institutions in financing mortgage sector lies on the limited construction resource especially to be able to provide funds for long term real estate projects,” said Mr Respige Kimati, head Corporate Banking- Assets.

Mr Faisal Guhad, project manager of Integrated Property Investments Ltd urged the government to adjust the current land tenure as they are not favouring foreigners to easily acquire lands to carry mortgage investments.

Source : The Citizen

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