Real estate industry hit as financial crunch bites

Dar es Salaam. Life is no longer the same for Mr Shaaban Mbuya, a bricklayer.

He used to made brisk business. However, for more than half a year now, the housing construction has faltered, eroding his income.

So, he longer depends on bricklaying. To meet his family’s requirements, he uses his motorcycle to transport people. He is a bodaboda operator. He does the bricklaying when the need arises.

“Things have changed since the new government came into power. People are not developing houses and when it happens, just a minor part of it will be done,” he laments.

“I’m actually considering to completely changing my job. There is no more quick money in bricklaying.”

His remarks confirms expert observations that the real estate industry has stagnated following the austerity measures by the government.

As liquidity has been tightened, construction has been hit.

Property development is becoming sluggish as customers find it difficult to buy houses following a tight liquidity stance Tanzania is going through.

While customers are wisely spending due to reduction of a disposable income, a move partly caused by government’s austerity measures that saw the cut of foreign trips, seminars and other expenditures which pumped out the money, developers and mortgage lenders are also holding back their works.

Developers agree that there is a sluggish business in the industry and clearly state that the future lies in the low-cost housing projects which will target salaried workers.

As private developers fear to start new projects, public developers say they have not changed strategies but they are much focusing on affordable houses targeting poor Tanzanians.

“I don’t expect to see any new project pursued by any private developer this year,” said Mutual Developers Ltd chief executive officer Maxmillian Matala, adding that they were facing difficulties in selling the houses.

“We have also discovered that many banks are now shifting their attention to industrialisation — a move that is affecting mortgage financing. There is also a shortage of surplus income to many people and even those a few who have it are not willing to buy in cash for fear of being called thieves.” Although Watumishi Housing Company (WHC) chief executive officer Fred Msemwa says they have not been affected, the future of housing is not on cash buyers. “Developers should now focus on affordable houses which buyers can do so using their salaries.”

WHC is a public property developer and a licensed fund manager for the WHC Real Estate. As a property developer, WHC-REIT is the main implementer of the Tanzania Public Servant Housing Scheme tasked with building of 50,000 housing units in five phases commencing from FY 2014/2015. Houses shall be sold under mortgage arrangements to public servants and other eligible members of the public across Tanzania.

The National Housing Corporation (NHC) announced to sell houses in its low-cost project at Iyumbu Satellite City in Dodoma. NHC director general Nehemiah Mchechu agrees that the market was slightly shaken by the slow movement of money in the circulation but says the corporation has not changed its strategy.

“Yes, there is stagnation of market but we are offering affordable houses which an individual can pay in cash or through mortgage finance offered by commercial banks,” he said.

“We have another low-cost housing scheme which will sell a house for not more than Sh30 million. We want to build for low income earners but that does not mean we are changing our policy. Our policy and strategy are still intact,” he said.

The mortgage market registered a decline of 16 per cent during the third quarter of 2016 compared to a growth rate of 29 per cent recorded in the second quarter of 2016, the Bank of Tanzania reported.

Outstanding mortgage debt as at September 30, 2016 stood at Sh404.42 billion compared with Sh481.63 billion recorded as at June 30, 2016.

The decline recorded in the third quarter of the year was mostly attributed to corrections made on reporting by banks where some commercial property loans were removed to only report residential mortgage loans, the central bank said.

During the third quarter, the mortgage market was dominated by five top lenders, who amongst themselves command about 68 per cent of the mortgage market. Equity Bank was a market leader commanding 24 per cent of the mortgage market share, followed by Stanbic Bank (14), Bank M (13), Azania Bank (11) and CRDB (6).