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Banks can boost country’s virgin mortgage industry
2006-03-08 07:09:33
By Mireny John
The number of people looking for rentable homes in all urban and peri-urban areas in Tanzania is just more testimony to the fact that the country’s mortgage industry is almost virgin.
These people, mostly middle and low-income earners in urban areas, would love one day to own their own homes.
Their noble wishes have remained as dreams for years because they lack the finance to enable them build their own houses.
Worse, since the collapse of the Tanzania Housing Bank (THB) in the late 1980s, the emerging domestic private sector has not seriously dared take up the challenge of financing the housing sub-sector in Tanzania.
Public housing schemes, principally under the National Housing Corporation (NHC), are known as spectacular non-performers for various reasons, including non-compliance to timely rental payments by tenants.
The government, on its part, has tactfully solved the pathetic housing conditions that has for long beset its civil servants by selling some of its old houses to a few of its seniors.
Yet, overall, Tanzania is experiencing a serious housing shortage.
For the few private developers right now trying to develop real estate, their focus and practical concentration have been concentrated on urban settings only .
Even in the urban areas, their center of attention is on office accommodation, rather than on residential space.
Banks, and other financial institutions, are well aware that the demand for good and affordable housing is increasing fast, meaning that the potential of the mortgage market is expanding constantly.
However, Tanzania’s mortgage industry has not undergone thorough reforms that would attract institutional investors to venture into the provision of sufficient home loans.
Banks are seemingly sitting on the fence in their investment priorities, taking into account that the potential returns likely to be obtained from rentals are much lower than the interest rates earned from both loans and purchase of government papers.
Apparently, the thin market for high-income households seems to have been saturated, while the middle-income group, by virtue of our standards, are apparently taking up houses meant for the low-income group.
The really poor end up in shacks in slums and other informal settlements in vulnerable, flood-prone areas.
Individually, financial institutions might have been tempted to provide lending to personal borrowers, but our land laws are yet to be refined to cater for unrestricted foreclosure in case of default.
In this kind of scenario, requirements that are needed for one to qualify for mortgages are extremely stringent, which is why owning a home is likely to continue as a dream for most Tanzanians.
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