Real estate ownership by foreigners a legal puzzle

Dar es Salaam. Tanzania has one of the fastest-growing real estate industries in Africa, but as it stands, foreign ownership is prohibited by law because the land is public property.

However, some real estate developers and stakeholders believe that allowing foreigners to own real estate could stimulate the sector’s growth, with most of the benefits accruing in the country.

This, they say, is because real estate is a business where all the value addition is done locally without the movement of capital because the property stays.

This comes at a time when the state-owned National Housing Corporation (NHC) has made proposals that, if adopted, will change the trajectory of the real estate sector in the country.

Some of the proposals include streamlining the process for Tanzania’s diaspora and foreigners to be able to purchase and invest in the real estate sector.

Speaking to The Citizen, the Watumishi Housing Investment (WHI) chief executive officer, Dr Fred Msemwa, said the foremost advantage comes in the form of Foreign Direct Investment (FDI) because foreign buyers bring capital from abroad.

This, he said, would increase the vibrancy of the real estate sector and increase its contribution to Gross Domestic Product (GDP).

It would also boost the collection of other taxes, such as the Value Added Tax (VAT) and corporate taxes.

“These initiatives need to go hand in hand with policy measures that will empower local Tanzanians to own homes. The recent budgetary measure taken by the government to remove VAT on houses costing below Sh50 million is a step in the right direction,” he stressed.

He said other initiatives must also go to the extent of enhancing the capacity of public and private sector developers to access construction finance for them to supply affordable homes in the market.

Export Connect Ltd, real estate expert, Ms Reginald Peter, said the biggest challenge lies in the laws that do not allow foreigners to own properties unless they own registered businesses or are married to Tanzanians. This excludes foreigners from owning real estate in Tanzania.

“In Dubai, for instance, there are a number of Tanzanians who own houses. If they are allowed to invest in Tanzania, it will be a significant boost to the country’s real estate market,” he stressed.

In addition, foreigners will stimulate the market, bring competition, and increase demand for houses, as there are currently many people owning many undeveloped acres.

However, a legal expert based in Dar es Salaam cautions against contradictory legal frameworks in the country’s real estate drive. She says that the laws pertaining to immigration and land ownership need to be in comformity.

Another local resident is against the idea of allowing foreigners to own land, saying that it risks leading to monopilzation of property by wealthy foreigners. he suggests that the government should do thorough research and analyse regulations from countries that have succeeded in allowing foreigners to own real estate.

Another one suggests that there should be cap on number of properties that a foreigner can own because the global market can lead to an influx and flooding of foreign ownership of real estate, much to the detriment of Tanzanians.

 Earlier this week, NHC director general Hamad Abdallah told a meeting of editors that Tanzania is missing a lot of revenue by denying foreigners the right to own real estate in the country.

He said countries such as Rwanda, Kenya, and South Africa, as well as advanced economies including Dubai, allow foreigners to own houses freehold.

“We are missing out on leveraging such big opportunities where celebrities could own their holiday homes in Tanzania,” he said.

He said Bill Gates, who is fond of visiting Tanzania, could own a home here. But due to our legal restrictions, he cannot own a vacation home in the country.

“What do we sell to Bill Gates when he comes to Tanzania other than photo paintings?” he questioned. “Bill Gates can afford to buy a $2 million holiday home in Arusha. This would give us an opportunity to entice him to make Tanzania his preferred destination.”

The Zanzibar example

This would have to come with a raft of changes in immigration laws to grant buyers some sort of residence that allows them access to their properties throughout the year. In Zanzibar, several changes have been introduced to rectify the foreign ownership issues, with the Zanzibar Investment Promotion and Protection Authority (ZIPA) Act No 14 of 2018 granting incentives to any buyer purchasing properties valued at not less than $100,000.

The benefits include securing permits for the primary owners and their husband, wife, or spouse, and four children under 20 years.

Other benefits are 100 percent foreign ownership, 100 percent exemption from worldwide income for foreigners and 100 percent allowance for free repatriation of profit after tax, among others.

 However, even with all these incentives, the bottlenecks stand in the way, for example, it takes a very long time for ZIPA to issue sub-title deeds for properties.

Residency permits are not assured as well given the fact that immigration is a Union matter that has to be handled by the Union Parliament for the law to change.

Developers at Fumba Town said recently that the pace at which implementation of certain conditions is done makes it difficult to achieve certain goals in time, citing issues of residence permits and title deeds as major impediments.

“It takes a very long time to get a title deed from the authorities because we are under the free economic zones and the titles are supposed to be issued by ZIPA. Yet the title deeds for other properties come from the ministry of Land, Water, Housing and Energy,” says Saeed Bakhressa, the project director of Fumba Uptown Living.