Tanzania’s real estate sector grows

Thursday, 22 November 2012 13:45

A Housing project in Dar es Salaam. Dar es Salaam is experiencing a construction boom even as mortgage finances remain from the reach of many. PHOTO/FILE By SturmiusMtweve, BusinessWeek Reporter Dar es Salaam. Even though Tanzanians have now taken a special liking to owning property, high prices and bank interest rates hinder them from achieving this goal, leaving the majority out. “Currently, if one wants to own a good house in Tanzania, he should have at least Sh300 million,” said Mr Eddie Mkwaya, a property manager with JR Real Estates Agency in an interview with BusinessWeek recently. This statement is a clear confirmation that low income earners will have to wait for a long time before they become owners of posh houses in the country – given the fact that Sh300 million is a tremendously huge sum for ordinary citizens. The demand for affordable houses has continued to grow. It now outstrips supply, particularly because most residential developerslargely focus on high-end customers. The demand for affordable housing is high as a result of the rising population and rapid migration from rural to urban areas coupled by rapid improvement in living standards. “I believe that real estate sector in Tanzania is yet to reach a booming stage, but it is growing. The current property market is hard and tough. High rise structures keep being erected, but economic hardships make buyers hard to come by,” said Mr Mkwaya. The experience shows that apart from high property prices, most landlords have been forcing house rentsin Tanzania to be paid on an annual basis or a term of six months –out of the service charges customers will have to cater for, which is too high –a situation that has seen majority distancing themselves from the fate. “Landlords need to wake up and smell the coffee, it is not right to demand people to pay a whole year’s house rent in advance given the fact that people receive their salaries on the monthly basis,” said Mr Mkwaya. Taking into account that the Tanzanian mortgage market is still relatively underdeveloped, with majority of home buyers paying in cash, there are efforts to boost housing market in which some developers have started working with banks to offer mortgages to buyers. However, high interest rates and strict loans procedures are still hindering the local mortgage markets from flourishing. For his part, Tanzania Real Estates Agency managing director David Hans said the trend of buying houses in Tanzania was changing -- positively. He said that more people get involved in construction of houses, but the deficit is still high and real estate is abnormally expensive. Mr Hans says this has made some property developers to consistently put real estate in areas where recovery of investment is easiest. This in turn has seen many commercial, residential and office blocks mostly being constructed in prime areas. At a moment, majority of the people do not have confidence in acquiring a new home believing that prices are still high too and are unreachable for low income earners. “There are too many conmen in this business. With their under the tree offices, they have been conning many people who aspire buying houses or plots, sometimes they send clients to the ongoing building, acting as real estate’s agents,” Says Mkwaya. "The property market is all about confidence and the survey confirms that good times are ahead, especially if the price and interest rates will continue falling,” says the expert in the sector According to Knight Frank Tanzania quarter one and two (Q1&Q2) market updates, it shows that Tanzania is witnessing increasing investment activities in various economic sectors which in turn is reflected in the increasing demand for office accommodation which is not matched by supply. This, however, has made it possible for Grade A offices to maintain rents of between $18 to $21 per sq.m per month plus security and other services and VAT, and lettings of ground floor space being attached to a condition of taking premises on the upper floors. “Contrary to beliefs by tenants that the rents will go down due to increasing number of new buildings, the rent levels are actually going up such that even Grade B buildings have been able to renew leases at a rent of up to $16 and $19 for ground floor premises,” according to Knight Frank. The report further shows that even rents for National Housing Corporation (NHC) properties which used to be significantly lower than the market are also being slowly reviewed to reflect the market price. MrMkwaya says many financial institutions, banks in particular, have ventured into offering loans to both individuals as well as organisations. This trend is expected to become steady in the short to medium terms as most new buildings are expected to enter the market by the end of 2013. Thereafter, rents are expected to be steady because most structures in the pipeline fall short of major tenants’ requirements particularly parking space. Source: The Citizen