Experts: Why Tanzania mortgage market uptake still low

Friday August 03 2018
mortgage pic

Housing Development Financing Corporation (HDFC) investment director Conrad D’Souza (middle) speaks at the launch of a mortgage bank, First Housing Finance, at an event held in Dar es Salaam last year. Left was a director of Bank M, Mr Simon Gregory, and right is the owner of African Risk and Insurance Services, Mr Sanjay Suchak. Mortgage market in Tanzania remains poorly tapped. PHOTO | FILE

Dar es Salaam. Experts have explained why the Tanzanian mortgage market is not performing well, despite availability of lenders and abundant funds.

So far, The Citizen understands that about $27 million (Sh60 billion) that the Tanzania Mortgage Company (TMRC) received as part of a concessionary loan from the World Bank in 2015 has remained unspent. And if by mid next year the money will remain lying idle it will have to be returned to the WB.

This is in addition to a Sh12 billion bond that TMRC issued in May, this year, and which was oversubscribed. The country has also seen the number of mortgage lenders increasing from three in 2009 to 31 in December 2017 a factor that has sent mortgage interest rates plummeting from 22 per cent to 16 per cent.

Yet despite all these available financial resources, the mortgage market in the country has remained largely underdeveloped and the mortgage uptake low.

“The concept of mortgage market is foreign in Tanzania. Not much awareness campaigns have been undertaken to make potential customers aware of the products available and the benefits they can get,” the TMRC chief executive officer, Mr Oscar Mgaya, explains.

Having enough funds for mortgage loans is also not enough if lenders lack skills to package and market the products in a way that appeals to clients.


“It’s obvious that when thinking of constructing a house, many Tanzanians still opt to use their own savings or access short-term loans from commercial banks. Very few ever think about mortgage loans,” Mr Mgaya, a seasoned real estate expert who worked in the US real estate market prior to his joining TMRC in 2011, noted.

Mr Mgaya, who also worked for the JP Morgan Chase and General Electric before joining TMRC, is insistent that unless Tanzanian bankers are well knowledgeable about mortgage - and customers are better informed about the products available - the mortgage market will continue to grow at a slow pace.

Challenges of Tanzania mortgage market

Mr Jackson Lohay, the senior manager for Retail Banking at Azania Bank Ltd, attributes lack of interest by customers on mortgage to the demise of state-run Tanzania Housing Bank (THB) in 1996.

The collapse of the THB left a vacuum in the real estate sector in the country.

“After the collapse of THB, it was common for construction of a single residential house to take up to five years because people depended on their savings and short term loans,” Mr Lohay noted.

House finance was re-established in the 2000’s by commercial banks, but lack of adequate legislation and unclear regulatory system were stumbling blocks, according to Mr Lohay.

Lack of reliable sources for long-term funding at affordable interest rates and limited product knowledge on the part of bankers, customers and government officers were added bottlenecks, he says.

Tanzania does not have enough developers, Mr Lohay says, but bureaucracy in issuing title deeds and building permits are also to blame for slow uptake in mortgage products.