Tanzania’s mortgage market declined in the first half of 2018, with tight liquidity and high interest rates cited as the major reasons. Also, the provision of credit to private sector players has generally been slow over the years.
The banking sub-sector is still also battling with high levels of nonperforming loans (NPLs) whose ratio-to-gross loans was estimated at 10 per cent in August. High NPLs levels signal deterioration in the quality of banking assets.
At the same time, the central Bank of Tanzania (BoT) is taking some monetary policy measures aimed at reducing interest rates and improving liquidity in the market.
Indeed, the central bank made it mandatory for banks to use credit reports during loan appraisal processes. It also directed financial institutions to implement strategies that would strengthen credit application processing, credit management, monitoring and recovery measures.
Aiming to push down bank lending rates, BoT reduced its discount rate to seven per cent last August – which was lower than the reduction to nine per cent it announced in August 2017.
The Tanzania Mortgage Refinance Company (TMRC) – which provides long-term financing to banks – recently announced the launch of its five-year corporate bond issuance programme aimed at raising Sh120 billion.
In the event, it has raised Sh12 billion in the first tranche.
Despite all these efforts to improve liquidity in the mortgage market – and lending in general – estate developers still need to pay special attention to low-cost houses which have a huge demand in Tanzania.
Admittedly, Dodoma may today be the focus for developers as the government relocates to that centrally-placed metropolis. But, even government employees want cheaper houses.
By the way, the government should also seriously consider appropriate tax remission on building materials to incentivize ordinary Tanzanians into purchasing the affordable houses as a matter of course.