NHC, developers sign Sh270 billion deal to change Kariakoo skyline

What you need to know:

  • A total of 16 structures that currently house 190 commercial and residential tenants will be demolished to pave the way for the construction of new and modern buildings in Kariakoo

Dar es Salaam. The National Housing Corporation (NHC) on Monday signed contracts with 21 real estate developers in a landmark development that could potentially change Kariakoo’s skyline.

The contracts require that the developers inject a total of Sh271 billion into putting up residential and commercial buildings on an NHC’s plot that currently has an asset value of Sh59 billion.

A total of 16 structures that currently house 190 commercial and residential tenants will have to be demolished to pave the way for the construction of new and modern buildings, the NHC Director General, Mr Hamad Abdallah, said.

“We expect this exercise will boost NHC’s turnover because, upon completion, the number of tenants will increase to 2,011, out of which 1,258 will be shop spaces,” said Mr Abdallah during the contract signing ceremony that took place yesterday and was witnessed by the minister for Land, Housing and Human Settlements Development, Mr Jerry Silaa. Similarly, the developers will set up 500 warehouses (stores) at Kariakoo.

The number of residential slots will rise to 253 from the current 72.NHC expects that actual construction will start on February 1, 2024, depending on the acquisition of building permits, which are currently being issued.

“Some current tenants are expected to start vacating the houses on February 1, 2024... Tenants with a good record of paying their rentals on time will return to the houses that they currently occupy after the ongoing projects,” he said.

In line with NHC’s partnership policy, the corporation will initially own 25 percent of each of the buildings being built, while the private developers will take the remaining 75.

After 10 years, NHC will acquire 25 percent more to raise its stake to 50 percent, but after another 15 years, the corporation will raise its ownership by 25 percent to cap it at 75 percent.

“We expect that at that time, the investor will have recouped the money he invested in the projects and started making profits. That means after 25 years, NHC will have 75 percent and the investor will remain with 25 percent, which is for the rest of the life of the project,” he said.

The arrangement was in line with NHC’s joint venture policy, which was last updated in November 2022.As such, Mr Abdallah said, investors in the projects will be free to use the unit title arrangement to ascertain the number of units that they own in the joint venture with NHC and use the same as collateral for a bank loan.

“We are doing this deliberately because it has cost us in the past. We have a building in the Victoria area of Dar es Salaam that we built in partnership with a private company. The investor used the NHC title deed to secure a loan, but he later failed to repay and left the country. Fortunately, we have worked with the AG’s Office to resolve the matter,” he said.

The 21 investment ventures are part of a total of 87 projects for which NHC has been looking for developers to partner with since the 2022 review of its joint venture policy.

Thirty-nine of the 87 projects are in Dar es Salaam. Kariakoo alone has 24, thanks to its attractiveness to investors. He said that currently, the cost of renting a square metre of space at Kariakoo is higher than in most cities the East and Central Africa. “It is probably only at Kariakoo where a developer gets tenants as soon as he starts putting a building up,” he said, adding that the 21 projects were allowed to proceed with the contract signing after NHC conducted due diligence with the help of other government agencies, including the office of the Attorney General. In his remarks, Mr Silaa said it was the government’s directive to conduct due diligence on the companies that had applied for a partnership deal with the NHC. “After a review of the policy, we do not expect a project to delay for any reason,” he said, hailing the move, which he said will increase the rentable space and asset value.

The government, he said, wants to see NHC form formidable partnerships with financially capable developers for the general good of the growth of Tanzania’s real estate sector.