Tanzania is one of the fastest growing countries on the African continent, and is rich in natural resources. At least 31.6 percent of the country’s 53.47 million people live in urban areas, with a population growth rate of almost three percent and an urbanisation rate of five and a half percent per annum.
The country has experienced impressive GDP growth rates over the past decade averaging almost seven percent per year. The GDP grew by 7.1 percent in year 2015, higher than the growth of seven percent in 2014 the rate is projected to remain at approximately seven percent through year 2020. The strong and sustained economic growth, coupled with a fast growing population (expected to more than double by 2050) have greatly contributed to the fast growing housing sector demand. The housing demand has also been boosted by the country’s efforts to develop its mortgage markets, with the introduction of the Tanzania Mortgage Refinance Company in 2010 under the Central Bank’s Housing Finance Programme. This has had the immediate, tangible impact of the number of mortgage lenders in the market increasing from 3 in 2009 to 28 by June 2016, and the average mortgage interest rate falling from 22 percent to 16 percent.
The positive developments in the housing industry have attracted substantial multilateral and donor support. The African Development Bank (AfDB) which has been supporting the country’s various development agenda since 1971 has recently expressed its commitment to focus on funding the construction of residential houses, development of agriculture and other economically viable areas in Tanzania during 2017, having already approved an assistance package of more than US$1.1 billion for year 2016-2020 to support the country’s transport and energy sectors.
This note covers a broad overview of housing and housing finance markets in Tanzania, drawing on the Tanzania profile in the Housing Finance in Africa Yearbook 2016 (7th Edition), which was launched at the AUHF Conference and AGM, in Abuja Nigeria, 2016. This edition covers 51 countries and five regions across the continent. The full Tanzania profile was written by Anna-Maria Shija for CAHF, and can be found here, while the profile for the East African Community (EAC) can be found here.
Housing Finance in Africa Yearbook 2016 | A Country Overview of Housing Finance Markets in Tanzania
Tanzania has 54 commercial banks and other private financial institutions. The banking sector in Tanzania is regulated by the Bank of Tanzania (BoT). The sector performed remarkably well in 2015. According to the BoT Financial Stability Report of September 2015, the banking sector continued to grow in terms of deposits and assets recording an annual growth of 12.4 percent in total assets and 6.7 percent in deposits to September 2015.
The mortgage market is among the smallest in the East African region (the ratio of outstanding mortgage debt to GDP in 2016 was 0.46 percent). According to 2014 Findex very few Tanzanians – only 4.5 percent of the adults aged 15 years and above report having an outstanding loan to purchase a home.
According to Bank of Tanzania, the mortgage market recorded an annual growth rate in mortgage loan balances of 45 percent in 2015. A key element in the growth of the mortgage market has been the provision of long term funding by the Tanzania Mortgage Refinance Company (TMRC). The TMRC was established in 2010 under the Housing Finance Project (HFP) which was created with US$40 million initial funding support from the World Bank to expand access to affordable housing finance in Tanzania. In March 2015 the World Bank extended an additional funding of US$60 million (with US$40 million being allocated for TMRC) to further sustain the project’s positive impact in the market. Additionally in May 2016, the AfDB approved a Partial Credit Guarantee of up to US$4 million (in Tanzanian Shillings) to support TMRC’s Medium Term Note program to mobilize long term funding from the local currency bond markets which is part of the company’s strategy of ensuring its continued sustainability. As at September 2016, the TMRC has 12 borrowing members (banks) all offering mortgage loans, as well as two non-borrowing members. In July 2016, the company opened up lending to non-member banks as part of its strategy to expand its customer base in order to ensure it continues to effectively fulfil its role of being a catalyst for mortgage lending in the country. CAHF has prepared a case study on Mortgage Liquidity Facilities throughout Africa, available for download here.
By 30 June 2016, TMRC had extended loans by TZS 45.9 billion (US$20.94 million) to eight of its member banks in a bid to facilitate mortgage lending. Mortgage loans’ average duration has also increased since the creation of the TMRC, from five to 10 years to 15-20 years with typical rates offered by lenders for the mortgage product currently varying between 16 and 19 percent.
As at 30 September 2016, total mortgage debt stood at TZS 404.42 billion (US$185 million) and 2 981 mortgages, a decline of 16 percent from 30June 2016. The average loan size as at 30 September 2016 was TZS 136 million (US$62,060.92), an increase from 30 June 2016 when the average loan size was TZS 133 million (US$60,634.24), suggesting upward pressure on housing prices and declining affordability. The loan to value requirement for mortgage loans currently stands at 90 percent as per the revised Mortgage Finance Regulations issued in 2015.
Given affordability levels, the microfinance sector is especially important in addressing housing supply in Tanzania and is growing steadily. A study commissioned by the Bank of Tanzania found that 41 percent of Tanzanians who borrow microloans planned to use these for housing construction or improvements. In 2011, a Housing Microfinance Fund (HMFF) was established as one of the components of the Housing Finance Project with a US$3 million contribution from the World Bank. Progress has been slow as no loans were extended up to March 2015 where an additional US$ 15 million was extended for the HMFF (out of the US$60 million extended for the Housing Finance Project) to make a total fund of US$18 million. The first disbursement of TZS 1 billion (US$456 264.74) was made on 31 July 2015 under the microfinance fund to DCB Commercial Bank Plc with the total credit line to the bank being TZS 3 billion (US$1.37million). This has marked the first step towards significant progress of the microfinance sector.
Tanzania ranks 139 out of 189 countries in terms of the ease of doing business according to Doing Business. In terms of ease of registering property, Tanzania is 133. Regionally, however, Tanzania is below par: it takes eight procedures to register property which is more than the SADC regional average of six procedures. Swaziland has the highest number of procedures at nine and the lowest number of procedures to register property in the region is four (Botswana, Lesotho, Mauritius and Seychelles). It takes 67 days to register property in Tanzania which is above the regional average of 52.6 days. The cost to register property in Tanzania is 4.4 percent of the property value which is lower than the regional average of 6.87 percent. This indicates that there is room for Tanzania to improve competitiveness in terms of ease of doing property related business by reducing procedures and duration of registering property.
Only ten percent of Tanzania’s total land surface is surveyed for various uses. The lack of land titles remains a fundamental problem in Tanzania as land rights need to be registered before they can be mortgaged. While 650 000 title deeds have been released, the Land registry plans on releasing 400 000 more in 2016/17.
Inflation remains around six percent, credit as a percentage of GDP increased from 13.83 to 15.42 percent, while the cost of a 50 kilogram bag of cement decreased from US$ 7.04 to US$ 5.93 in 2016. This is well above the continental average of US$ 9.79 for a 50kg bag of cement. Mortgages as a percentage of GDP stands at 0.46 percent, while the number of mortgages is 2 981 as of September 2016, reported by TMRC and BoTMortgage Market Update. The price of the cheapest newly built house recorded by CAHF has decreased, from US$ 20 992 last year to US$ 19 801 this year. Note that the data table extracted from the Yearbook does not reflect 30 September 2016 data from the quarterly Tanzania Mortgage Market update as it was published before the release.
The average income across urban areas in Tanzania (2015 data reflected in 2005 constant US$) is estimated at US$ 2 625). In order to buy the cheapest newly built house, reported at about US$ 19 801 in 2016, one would have to earn US$ 9 797, in 2005 constant US$. This means that only about 3.2 percent of urban households can afford this house.
The graph below shows the affordability of market segments across urban areas in Tanzania, in terms of the potential book size (in 2005 constant US$) that might be achieved if each household in the band were to access the loan they could afford (and assuming that this loan could actually buy a housing product that was suitable for their needs). This is shown assuming a bond term of 25 years and an interest rate of 18 percent (based on current averages in Tanzania). It is estimated that 3.2 percent of urban households could afford the cheapest newly built house, formally built by a developer, priced in 2016 at US$ 19 801 (US$ 14 878 in 2005 constant US$). Effectively, this represents approximately 110 967 potential loans – significantly more than the 4 065 mortgages that currently comprise the Tanzanian mortgage market. This indicates the potential for the expansion of the mortgage market in Tanzania.
At the same time, the bulk of the population earns less than the US$9 797 needed to afford even this very basic house. The greater investment opportunity, therefore, must be the incremental housing delivery and financing market. It is in this space that the Central Bank’s Housing Microfinance Fund is targeted and where substantial growth can be expected. Using a housing micro finance loan with a term of five years and interest rate of 24 percent the potential loan book size is US$4.3 billion.
*The potential loan amount, household income and potential booksize are all in 2005 constant US$. The potential booksize for the 3.2 percent of the population who could afford a mortgage for the cheapest newly built house formally built by a developer would be worth an equivalent of US$ 1.6 billion in 2015.
While the cost of the cheapest newly built house formally built by a developer is quite low by regional standards, supply of these units is limited and most units under construction are priced much higher. Middle income two to three bedroom units on the outskirts of the capital, Dar es Salaam, range from US$30 000 – US$150 000 in areas such as Kijitonyama, Kinondoni and Mbezi Africana. In higher income areas such as Mikocheni, Upanga, Masaki and Oyster Bay, three to four bedroom units are generally priced at between US$200 000 and US$3 million.
In December 2015, the National Housing Corporation (NHC) had US$400 million worth of on-going projects in real estate and US$800 million by 2020. Recent projects completed by the NHC in Dar es Salaam include Victoria Place consisting of 16 flats and 88 two to four bedroom apartments, kids playing area, swimming pool, gymnasium and shopping mall; and Eco Residence consisting of 120 three bedroom housing units with prices ranging from TZS 213 million (US$97 184.39) to TZS 254 million (US$115 891.24) plus VAT. Major ongoing projects in Dar-es-Salaam also include 711 two to four bedroom apartments known as @ Kawe with prices ranging from TZS 297 million (US$135 510.63) to TZS 672 million (US$306 609.91) plus VAT as well as Mwongozo Estate consisting of 216 two to three bedroom units and town houses which sell for between TZS 44.7 million (US$20 395.03) to TZS 128 million (US$58 401.89) VAT exclusive.
The Public Servants Housing Scheme involves the construction of 50 affordable housing units over five years, and administered by Watumishi Housing Company (WHC). In November 2015 WHC launched a construction drive of 800 houses in four regions namely Tanga at Pongwe area (40), Mwanza at Kisesa Township (59) and Dar es Salaam which will receive the bulk of the houses to be built in Kigamboni (369), Bunju (71) and Magomeni Usalama (104).
The National Social Security Fund (NSSF) is in the middle of constructing its housing development in Kigamboni (the Dege Eco Village satellite city) which will bring 7 460 housing units to the market by 2017. Total project costs are estimated at around US$544.5 million.
Avic International has continued with implementation of the Avic Town project in Kigamboni with plans to build 5 000 housing units in the next three years.
A number of policies and regulations are relevant to housing and housing finance in Tanzania. The government of Tanzania has recognised housing as one of the basic needs for all. The Ministry of Lands, Housing and Human Settlements Development has been mandated to administer land and human settlements in Tanzania on behalf of the President of Tanzania who serves as trustee of all land. Some policies and legislation governing the human settlements and finance environment in Tanzania include:
- National Human Settlements Development Policy of 2000: The policy was developed from the Government’s resolve to address and reverse the deterioration of human settlements conditions in the country and its recognition and commitment to the decision by the United Nations Habitat Agenda II and the Istanbul Declaration on Human Settlements Development. The Government intends to facilitate adequate delivery of shelter and the development of sustainable human settlements in the country. The policy aims at harnessing existing initiatives in shelter delivery and infrastructure investment by the various actors in the public, private, informal and community sectors as well as guide the rapid urban growth and the transformation the settlement pattern.
- The Mortgage Finance Act, 2008: The Act was issued to provide guiding principles for mortgage financing in Tanzania.
- The Banking and Financial Institutions (Mortgage Finance) Regulations, 2015: Issued in July 2015 (under the Banking and Financial Institutions Act of 2006) to replace the 2011 regulations, these regulations were developed with the aim of establishing principles to govern mortgage finance operations for persons involved in mortgage lending in Tanzania. Key changes made from the 2011 regulations are on minimum capital requirements for housing finance companies where the limit was increased from TZS7.5 billion (US$3.52 million) to TZS15 billion (US$7.04 million), increase of maximum tenor of mortgage loans from 20 to 25 years, increase of loan to value ratio to 90 percent from 80 percent with exceptions being allowed to a ratio of 100 percent given that the borrower is able to provide additional collateral such as fixed deposits, pension entitlements, collateral replacement indemnity or government securities whose total value shall be at least 10 percent of the value of the property. These changes (especially on the loan to value lending criteria) are expected to enhance mortgagors’ affordability and hence further boost mortgage lending.
- The Banking and Financial Institutions (Tanzania Mortgage Refinance Company) Regulations, 2011: These are regulations issued to guide/govern the operations of the TMRC which is a secondary market wholesale liquidity facility established under the Housing Finance Program to provide liquidity to mortgage lenders within the country in order to expand access to affordable housing finance.
- National Microfinance Policy of 2000: The objective of the policy is to establish the basis for evolution of an efficient and effective micro financial system that serves the low income segment of the society.
Visit our Tanzania page to access blogs, documents and other useful publications on the housing finance system in Tanzania.
Key CAHF resources include:
- Housing Finance in Africa Yearbook 2016 – Each year, CAHF publishes its Housing Finance in Africa Yearbook. The 2016 edition has an up-to-date profile for Tanzania and the East African Community.
- Case Study 2 | The Role of Mortgage Liquidity Facilities in Housing Finance: Lessons Learned from Egypt, Tanzania, Nigeria and Malaysia This case study commissioned by CAHF looks at the role of mortgage liquidity facilities with lessons learnt from four countries including Tanzania.
- Tanzania Mortgage Market Update, December 2014: This paper, prepared by Tanzania Mortgage Refinance Company Limited (TMRC), provides an overview of the mortgage market in Tanzania as of 2014. It looks at recent developments, examines TMRC’s operations, in the market.
- Policy Development in Support of Housing Microfinance:<span “> The Tanzanian Case: This presentation was given by Judith Sando from WAT Human Settlements Trust (an organisation with the mandate to improve living conditions for middle to low income households and secure tenure through affordable housing finance) at the 6th African Microfinance Conference held in Durban from the 12th to the 15th of August 2013. The presentation gives a highlight of the Tanzanian housing market and the challenges that the sector faces.
- Two Years in Piloting Housing Microfinance in Tanzania: Habitat for Humanity Tanzania began its Makazi Bora housing microfinance program in late June 2009 with the aim of establishing an effective housing microfinance product and methodology that would contribute to the growth of the practice in the region. This report covers the first two years of operation. Makazi Bora roughly translates as “better housing” in the Kiswahili language spoken across Tanzania and much of East Africa.
- Overview of the housing finance sector in Tanzania: his report provides an overview of Tanzania’s housing finance sector was written in 2010. It is the 10th report in a series exploring access to housing finance across Africa, with a particular emphasis on how poor and lowmoderate income households finance their housing. This report provides an overview of Tanzania’s macroeconomy as it relates to housing finance, the legal and policy framework for housing and housing finance, the housing supply and demand factors at play, and how housing finance fits into this space. The report concludes with some recommendations.
- Housing Finance Access frontier in Tanzania: The housing finance access frontier methodology uses FinScope data to understand levels of access to financial products and services. This presentation sets out the data for access to housing finance in Tanzania. The analysis provides a useful starting point for a discussion on enhancing access to housing finance in Tanzania in a sustainable way.
- Benchmarking Housing Costs in Fifteen Countries in Africa is a forthcoming project which includes Tanzania. The aim is to explore the cost of a basic, entry level house across different countries in Africa, and to understand what drives cost differences. This study will be released with its accompanying data in the next month.Other useful resources include:
- Financial Sector Deepening Tanzania – aims to develop a deeper financial system that can provide greater access to finance to more Tanzanians through developing market infrastructure and support services to financial service providers, improve policy and regulatory frameworks and data gathering and dissemination for delivery of financial services.
WAT Human Settlements Trust – focuses on empowering low and middle income communities by providing adequate and affordable housing with secure tenure for low and middle income households through housing microfinance and housing support services.
Rooftops Canada – Supports WAT-Human Settlement Trust in Tanzania. To date a housing loan fund was established with the support of Rooftops Canada as well as other initiatives to increase access to housing micro finance in Tanzania.
REALL – Reall is supporting ten projects underway in Dar es Salaam to provide land, housing, clean water and sanitation.
AUHF – The African Union for Housing Finance is a member-based association of mortgage banks, building societies, housing corporations and other organisations involved in the mobilisation of funds for shelter and housing on the African continent. Tanzania is well represented in the AUHF, with the following members:
- Bank of Tanzania
- CRDB Bank
- M Mortgage Finance (Tanzania) Ltd
- National Housing Corporation Tanzania
- National Microfinance Bank Tanzania
- Tanzania Mortgage Refinance Company Ltd
- Watumishi Housing Company (WHC)
- CRDB Bank – CRDB Bank offers a comprehensive range of Corporate, Retail, Business, Treasury, Premier, and wholesale microfinance services through a network of over 90 branches, 260 ATMs, 15 Depository ATMs, 12 Mobile branches, 900 Point of Sales (POS) terminals. Similarly, the bank has scores of Microfinance partners and institutions through which pertinent services are rendered to all customers. CRDB Bank is the first to offer Agency Banking services Tanzania at the beginning of 2013. The Bank also operates through Internet and Mobile banking services.
- National Housing Corporation Tanzania – The NHC is under the Ministry of Lands, Housing and Settlements Development. The Corporation’s portfolios have been divided into income centres which are income generating and self sustaining directorates and cost centres which play a supportive role. the NHC is responsible for construction of houses for sale, property management and related activity.
- National Microfinance Bank – National Microfinance Bank Plc (NMB) is one of the largest commercial banks in Tanzania, providing banking services to individuals, small to medium sized corporate clients, as well as large businesses.
- Tanzania Mortgage Refinance Company Ltd – Tanzania Mortgage Refinance Company Limited (TMRC) is a private sector institution owned by the banks with sole purpose of supporting banks to do mortgage lending by refinancing banks’ mortgage portfolios.
- Watumishi Housing Company – Watumishi Housing Company (WHC) is a public entity established in 2013. WHC is a property developer and a licensed fund manager for management of the WHC Real Estate Investment Trust (WHC-REIT).
- African Development Bank (AfDB) – Established with the mandate to spur sustainable economic development and reduce poverty in Africa. AfDB mobilises and allocates resources for investment in African countries, while providing policy advice and technical assistance in order to support development efforts.
- African Economic Outlook – An excellent yearly publication looking at all aspects of the Tanzanian economy.
- Bank of Tanzania – The primary regulator of Tanzania’s financial sector, BoT is also a source of data for mortgage market analysis, information on financial markets in Tanzania etc.
- Doing Business Indicators – A World Bank publication of quantitative indicators on business regulations and the protection of property rights that can be compared across 189 economies over time.
- Making Finance Work for Africa – Tanzania – An initiative to support the development of African financial sectors.
- Mix Market – A data hub where microfinance institutions (MFIs) and supporting organisations share institutional data to broaden transparency and market insight.
- UN Habitat – A United Nations programme working towards a better urban future, listing the latest news and all its work in Tanzania.
- World Bank – The World Bank is extensively involved in the growth and development of Tanzania’s housing finance sector through its support of the Housing Finance Programme in the Bank of Tanzania.