Why buying a home remains a pipedream for the majority

In the midst of the ‘low-cost housing’ hype in Tanzania, Emmanuel Kimolo has pushed further away, his dream of owning a house. Discouraged by the skyrocketing prices of residential properties in Dar es Salaam, the IT expert says he may have to consider other options in his quest for a place to call home.

The average cost of a completed two-bedroomed house in a high-density suburb in the city is anything between Sh70 million and Sh100 million, according to a quick survey conducted by Sound Living recently.

Price tags on houses advertised online, and those sold by the state-run National Housing Corporation (NHC) are beyond the reach of the majority of even professionals in the middle-income bracket, who are targeted by such programmes.

“I have since abandoned the idea of buying a house in Dar es Salaam because it’s crazy considering what I earn currently,” says Emmanuel. With a net salary of Sh1 million, the father of one says a mortgage is no option either because he does not qualify.

“There is so much hype about low-cost housing, but the institutions involved in the projects have systematically elbowed us out. Ironically, they claim the housing projects are meant for middle and low income earners,” he tells Sound Living.

Emmanuel is considering the route many have taken to become house owners. “I will have to buy a plot and start building a house slowly. How long will it take me to complete it? Only God knows,” he says.

Even so, he will need not less than Sh12 million to buy a plot in Mbweni, just after Tegeta, some 20 km from the city centre on the New Bagamoyo Road.

The area has over the past few years grabbed the attention of homeseekers and property speculators, who buy land for resale at hiked prices only a few months down the line.

NHC director general Nehemia Mchechu says despite efforts to ease the housing crisis in the country, owning a residential property remains a major headache.

“This is not a problem found in Tanzania alone, but also across the globe. The demand for houses is too high, and we have a few developers,” he says in an interview with Sound Living. The NHC is partnership with nine financial institutions for mortgage financing. But the much-hyped low-cost houses have eluded the majority of the intended beneficiaries over the years due to high interest rates and prohibitive requirements.

According to the mortgage plan, NHC built the ‘low-cost’ houses for average income earners to buy, with the option of securing a loan from any one of the nine banks. But the prices of the properties in Kigamboni, Dodoma, Arusha, Moshi and Morogoro have made it impossible for many to even consider the idea of applying for a loan from the bank.

Futile attempt

Emmanuel says he once approached one of the banks offering mortgages in partnership with NHC, but he realised it was a futile attempt.

“When I enquired, I was told that the first thing I had to do was pay 10 per cent of the Sh68 million to the NHC, and another 10 per cent to the bank before getting the keys to the house.

“This meant I would be left with Sh53.6 million to pay through the bank loan. But then I was told the bank would be deducting Sh902,000 every month from my net salary of Sh1 million for 15 years. I could only try to imagine how a family would survive on a monthly salary of Sh98,000,” he says.

The majority of borrowers cannot afford the high interest rates banks charge on mortgages. In the last quarter of 2011, the Bank of Tanzania (BoT) expressed concerns over high interest rates local financial institutions that had received cheap World Bank loans for mortgage financing charge desperate home seekers.

The banks were demanding interests on housing loans ranging from 15 to 19 per cent. On the other hand, the bank borrowed from BoT at a low interest rate of eight per cent.

But the lenders defended the high interest rates on the basis of high risks of lending. They argued that many borrowers habitually defaulted, and it was difficult to trace them because the country had no national identity cards.

Even as more players joined the real estate business, property prices have risen rapidly in the past 10 years, causing speculation about the source of the money. In Mbweni, some plots that cost an average of Sh1.5 million in 2008 are now being sold at Sh12 million.

And one can easily get the shocking high levels of property prices on online advertisers, zoomtanzania.com. For example, a seemingly old two-bedroom house in Kariakoo is currently being sold at $400,000 (approximately Sh640 million), while another one with three bedrooms in Tabata is going for $45,000 (approx. Sh72 million).

In Sinza, houses cost an average of $70,000 (Sh112 million). Another house in Mwananyamala B costs Sh321 million while in Tabata Kinyerezi, there is a modest property being sold at an exorbitant price of Sh110 million.

Even in Dodoma, where demand is not as high as in Dar es Salaam, there are houses being sold for as much as Sh100 million.

In 1999, Mzee Abeid Msangi bought a three-bedroom house in Tegeta Kibaoni for Sh7 million. Now, he won’t sell it for anything less than Sh75 million.

The NHC boss says it would have been easier for people to buy houses through mortgage financing, but some borrowers abuse the facilities when they default causing banks to not want to take too many risks.

“It is everyone’s dream to own a house, but all people will have their dreams fulfilled,” he says.