Mortgage market suffers as tight liquidity persists

Dar es Salaam. Banks have reduced their lending to finance housing in the first six months of 2018, reflecting a tight liquidity and the non-performing loans that are some of the major challenges facing the banking industry.

The mortgage market registered a one per cent decline in the first quarter of this year and extended the decline to 2.8 per cent in the second quarter, according to a recent report released by the Bank of Tanzania.

By June 30, 2018 the total lending by the banking sector to finance development of residential houses was Sh331.49 billion compared with Sh340.92 billion recorded at the end of March and Sh344.84 billion at the end of December 2017.

The outstanding mortgage debt had reached Sh416.85 billion by the end of March 2017.

“During the quarter the BoT continued with implementation of its accommodative monetary policy stance aimed at boosting credit growth and supporting economic activities. The central bank reduced its discount rate to 7 per cent in August 2018, further down from the reduction to 9 per cent in August 2017. This measure is expected to push for a further downward shift on banks’ lending rates,” the report states.

Tanzania is home to over 50 banks and 31 of the lenders participate in issuing mortgage. The number of mortgage lenders in the market increased from 3 in 2009 to 31 by June 2018, and the average mortgage interest rate has fallen from 22 per cent to 15 per cent during that period.

The local housing industry has a deficit estimated at three million units with an annual demand of 200,000 houses.

By June 30, 2018 the report indicates that the mortgage market was dominated by five top lenders which command a 59 per cent of the mortgage market.

Stanbic Bank was a market leader accounting for 18 per cent of the mortgage market share, followed by Bank M (14 per cent), CRDB Bank (12 per cent), Azania Bank (9 per cent) and Commercial Bank of Africa (6 per cent).

“More positive developments are expected in the market as more banks continue to launch their mortgage loan products as competition in the traditional banking products continues to intensify,” states the report.

The falling trend of the mortgage in Tanzania comes at the time developers are reported to have a special focus on housing projects in Dodoma as the government is relocating its administrative functions to the newly city.

Reports have also it that the number of unoccupied buildings in Dar es Salaam is increasing following the relocation.

National Housing Corporation (NHC) and Watumishi Housing Company are the state-owned developers which have housing projects in the designated capital.

NHC carries out various projects focusing on high, medium and low income earners which continue to have a positive impact on the housing market.

The Kawe satellite city is one of the NHC projects in Dar es Salaam. It will involve 500 buildings and is expected to become the busiest centre in Dar hosting about 50,000 people for 20 hours non-stop.

However, the project is said to have stalled for almost a year now as NHC grapples with securing Sh232 billion credit line as it waits for government guarantee.

Long-term financing

Tanzania Mortgage Refinance Company (TMRC) provides long term funding both in the forms of refinancing and pre-financing to the banking sector.

The 13-member TMRC has already extended loans worth Sh96.1 billion to ten of its member banks and four non-member banks.

As of August 2018, refinancing and pre-financing mortgage loans advanced by TMRC to its member and non-member banking institutions were equivalent to 29 per cent of the total outstanding mortgage debt.

“A significant opportunity therefore still exists for TMRC to refinance the remaining 71 per cent of the mortgage market portfolio,” according to the report.