Covid-19 impact on Dar’s real estate business

14Sep 2021
Francis Kajubi
Dar es Salaam
The Guardian
Covid-19 impact on Dar’s real estate business

WORKING from home had become the only option of avoiding further spread of Covid-19 since mid-2020, the approach that is blamed by developers and property managers for affecting the real estate business in Dar es Salaam.

A side view for Treasure Victoria Apartments at Victoria area in Dar es Salaam.

The economic sector that developers and managers say contributes billions of money to the gross domestic product (GDP), the government on the other hand say it is growing fast but with less investment returns.


National Bureau of Statistics’ report dubbed National Economic Status for June 2021, states that between July 2020 and June 2021, the agriculture, forestry and fisheries sector provided 61.5 percent of all jobs followed by the trade and maintenance sector (14.5 percent).The real estate industry accounted for only 0.04 percent of all jobs with a smaller contribution than other sectors.


The Bank of Tanzania (BoT) Annual report for 2019/20 on the other hand states that industry and construction activity, which includes mining and quarrying, manufacturing, construction, electricity and gas supply, as well as water supply and sewage, grew by 11.8 percent in 2019 compared with 9.7 percent in 2018.


BoT asserts that construction, which contributed 27.5 percent of GDP, grew by 14.1 percent in 2019, mainly associated with on-going infrastructure projects including: Standard Gauge Railway (SGR); Ubungo interchange; construction and expansion of ports, airports, roads and bridges; and building of ships and ferries in major lakes.


Far from the central government’s relocation to Dodoma capital, real estate managers say that the Covid-19 pandemic eruption has disturbed property business in Dar es Salaam because some of their tenants, mostly non-government institutions, have been working from home for almost a year now.


Property managers blame that economic crunch and working from home has led to suspension of some tenant contracts while others demand for rental charges relief to renew their letting contracts. According to them, working from home is an extension to cutting down on working hours and staff retrenchment as a way of avoiding spread of the pandemic and cutting down operational costs.


However, the International Labour Organisation (ILO) in its World Employment and Social Outlook for June 2021, states that total working-hour losses have translated into a sharp drop in labour income and an increase in poverty due to Covid-19 related lockdowns. Around half of the working-hour losses were due to the reduced hours of those who remained employed.


“The economic and labour crisis created by the Covid-19 pandemic could increase global unemployment by almost 25 million people,” reads part of the report.


ILO states that global labour income, which does not include government transfers and benefits, was U$3.7trillion (8.3 per cent) lower in 2020 than it would have been in the absence of the pandemic. For the first two quarters of 2021, this shortfall amounts to a reduction in global labour income of 5.3 per cent equivalent to U$1.3trillion.


Covid-19 eruption has been an additional challenge to the central government’s relocation to Dodoma capital. Property managers have told The Guardian that the pandemic has pushed them to further cut down their rental and purchasing prices.


Along new Bagamoyo road, a neighborhood that is becoming prime with booming real estate projects, current rental prices stand at an average of U$12 per square meter compared to the city center U14 per square meter. Apartments are sold at an average of U$130,000 lower from the city center average of U$280,000.


In the posh neighborhoods of Masaki, Oysterbay and Upanga rental prices for apartments with three to four bedrooms ranges between U$4,500 and U$6,000 per year. Purchasing prices, however, stand between U$500,000 and 1,500,000. Previously, managers say that rental prices went up to U$8,000 per annum and purchasing prices topped U$2million.


Jacqueline Samson, Property manager, Skyline Property Limited said that its 20 flats skyscraper along new Bagamoyo road is rented at U$10 per square meter excluding VAT but U$12 with VAT inclusive. She said that the minimum lettable space is 50 square meters. The buildings have two wings covering 800 square meters.


“The rental price is negotiated and can even be lower to that depending on how large the space the customer needs. We charge U$50 a month for parking one car. Water bills are inclusive to the rental charges but every tenant owns his own electricity meter. Letting period starts with a minimum of three months,” said Samson.


Just next to it is the ZO Spaces commercial block with ten floors. The property is rented at U$12 per square meter on its second and third floors but the price can be a bit higher on upper floors.


Clarah Herman, Sales Supervisor at Victoria Noble Center, said that the property which is along the new Bagamoyo road, with 15 flats, is on market with a rental price of U$10 per square meter and a minimum purchasing price of U$168,000.


“The U$10 per square meter includes tax and service charge. A fully furnished three bedroom apartment goes at a minimum purchasing price of U$168,000.Why choose Noble Center? It has office spaces in the front and residential apartments in the back. Its spacious offices start with 53 square meters,” said Herman.


On its opposite side, there is a newly Treasure Victoria Apartments by the Jiangxi International Tanzania Investment, a China based company. The company has so far committed over U$9million into the 17 flats building.


Rehema Mahmud, the company’s marketing and sales executive, told The Guardian that the three bedroom apartment goes at U$150,000 and at U$120,000 for a two bedroom apartment.


‘One has to pay 20 percent of the purchasing price before moving in and complete the rest of the money in 12 months. The building has 83 apartments. It has a five star swimming pool, kids swimming pool, kids play area, gym, CCTV, restaurant and a roof top drink lounge where one can have a view of Dar es Salaam,” said Mahmud.


According to the Center of Affordable Housing Africa data, Tanzania had 12.3 million households in 2018 of which 8.2 million (66 percent) are in rural areas and 4.2 million (34 percent) are in urban areas. The report anticipates that in the next five years households in rural areas will increase by 255,000 a year and 130,000 households in urban areas.


“This rapid urbanization, coupled with a reducing average household size, will require consistently larger numbers of smaller, more affordable housing units to satisfy urban housing demand from rural-urban migrants and newly formed families in urban areas,” reads the report in part.


The United Nations Conference on Trade and Development’s (UNCTAD) Least Developed Countries Report 2020 (LCDs) dubbed ‘Productive Capacities for the New Decade’ states that while the pandemic had at least initially a less than catastrophic health impact, its economic repercussions have been ruinous.


According to the report, the protracted recession led to job destruction, threatened enterprise survival with related losses in terms of productive capacities and could have a long-term effect on potential output.


The list of LDCs is reviewed every three years by the Committee for Development Policy, a group of independent experts that report to the Economic and Social Council of the United Nations.


In this context, the list developed countries are: Uganda, United Republic of Tanzania, Zambia, Angola, Benin, Burkina Faso, Burundi, Central African Republic, Chad, Democratic Republic of the Congo, Djibouti, Eritrea, Ethiopia, Gambia, Guinea, Guinea-Bissau, Haiti, Lesotho, Liberia, Madagascar, Malawi, Mali, Mauritania, Mozambique, Niger, Rwanda, Senegal, Sierra Leone, Somalia, South Sudan, Sudan, and Togo.

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