How Interest Rates are Shaping Tanzania’s Housing Agenda

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With Tanzania’s urbanization on the rise, the need for affordable housing finance is increasing.

  • High-interest rates and lack of affordable housing remain the prime constraints facing Tanzania’s mortgage market.
  • There are 32 banks offering mortgage facilities, down from 33 following acquisition of First National Bank Tanzania Ltd by Exim Ban

In the sun-soaked expanses of Tanzania, a housing revolution is unfurling, led by an unlikely conductor: interest rates. The symphony of change echoes the crescendo of demands for affordable housing, reverberating from the National Housing Corporation (NHC).

With Tanzania’s urbanization quickening its pulse, the need for housing finance surges alongside the ascent of metropolitan dreams.

In a nation where growth is as tangible as the earth beneath, the NHC’s data reveals an urgent anthem: a staggering demand for three million housing units, sprouting at a rate of 200,000 annually. This wave is in sync with the rapid urbanization gripping the nation, weaving a narrative that intertwines aspiration with finance.

Hopes of home ownership

The link between demand and finance becomes poignant when Oscar Mgaya, the CEO of Tanzania Mortgage Refinance Company (TMRC), speaks. He unveils a stark reality: families of lower and middle income, trapped without access to housing finance, spend years in dilapidated dwellings or perpetual rentals, dimming their hopes of ever owning a home. This poignant tale galvanized the birth of TMRC, a government entity dedicated to bridging the chasm in housing finance.

A fitting solution, for a nation marching towards prosperity, housing takes center stage in the government’s agenda. As economic strides enrich the nation, translating that progress into homes takes precedence.

CEO Mgaya, with an unwavering voice, asserts, “Access to affordable housing can have a big impact on a person’s well-being.” Homes become not just structures but keystones to health, hygiene, education, and a better life.

The Tanzania Housing Finance Project, a vessel of change, empowers TMRC with resources. Liquidity flows through mortgage lenders, predominantly commercial banks, fueling affordable loans.

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The narrative unfolds as a government agency sets the stage, funds dance through its corridors, and commercial banks orchestrate the symphony of lending. The result: loans that are more affordable, loan tenures stretching to a quarter-century, and interest rates plummeting from their towering perch to a 15 percent per annum.

Mortgages to marginalized segments

In this ballet of finance, TMRC’s innovations know no bounds. A Housing Microfinance Fund emerges, a lifeline to low-income earners, knitting dreams into reality.

As a result, the landscape flourishes with growth, witnessing the emergence of nearly 30 additional financial institutions offering mortgages, a mortgage loan portfolio surging past 5,000, and the touch of housing micro-finance reaching 2,000 beneficiaries, with nearly 34 percent being women.

A new crescendo rises as TMRC finds an ally in the International Finance Corporation (IFC). A private sector embrace breathes fresh life into TMRC, drawing new investment through the IDA Private Sector Window.

In this partnership, the power of finance harmonizes with the public sector, catalyzing economic growth and fostering inclusion, especially for marginalized segments like women.

The Central Bank of Tanzania (BoT) chimes in, revealing an average annual growth of 7.01 per cent in the mortgage market. There are 32 banks offering mortgage facilities, down from 33 following acquisition of First National Bank Tanzania Limited by Exim Bank Tanzania Limited.

The rhythm of interest rates sets the tempo, driving the outstanding mortgage debt to $225.46 million, an average mortgage debt size of $37,628, and a melodic range of interest rates oscillating between 15-19 percent.

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BoT notes: “High-interest rates and lack of affordable housing remain the prime constraints on mortgage market growth.”

CPS adopts modern construction methods

Yet, the dance of progress extends beyond finance, finding its partner in the private sector. Real estate developer CPS emerges as a virtuoso, blending technology with the art of creation. Modernity kisses affordability, as CPS adopts modern construction methods, sculpting homes that resonate with progress.

“CPS is embracing timber as the solution to the challenges of rapid urbanization and carbon emissions,” CPS chief executive notes.

Their clarion call, embracing timber as a cornerstone, ignites a vision of sustainable housing, urbanization, and carbon emission reduction. CPS’s harmony extends into the woods, as they collaborate with the Tanzanian government to orchestrate policies that nurture sustainable forestry.

CPS is working with the government of Tanzania to develop policies that support sustainable forestry. Already the company has launched some 5,000 units of timber housing in Dar es Salaam and is aiming to build at least 10,000 homes every year across Tanzania.

As Tanzania transforms, private players like CPS and innovative partnerships with government entities like TMRC paint a vibrant tapestry. Timber homes rise, the tallest hybrid timber tower in the world soars, and eco-cities spring forth. The potential of tech-rich Silicon Zanzibar sparks a vision, encapsulating the spirit.

Some of the timber projects that have been undertaken by CPS include Burj Tower in Zanzibar. CPS has also built Fumba Town, East Africa’s first eco-city complete with ultra-modern residential and commercial buildings. Another is the Silicon Zanzibar project which is a partnership with Zanzibar Ministry of Investment and Economic Development.

Tanzania’s journey, guided by the rhythm of interest rates, underscores the potency of finance in building futures. In this evolving overture, the nation’s melody harmonizes aspirations, finance, and innovation, painting a portrait of growth where everyone has a place on the stage.

Source: FurtheAfrica

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