What NHC’s newly revised joint venture policy seeks to achieve

Dar es Salaam. A revised version of the joint venture policy to expand the provision of affordable homes was revealed by the National Housing Corporation (NHC) yesterday.

The law that permits the government-run housing developer to collaborate with the private sector on the creation and ownership of properties has been in effect since 1993.

However, no public-private partnership (PPP) project has been implemented in the last 10 years, which prompted the firm to examine the strategy in an effort to boost the effectiveness of joint venture projects.

“We haven’t engaged in a joint venture with the private sector in the last 10 years because we wanted to gauge how well the projects we had already entered into with joint ventures were performing,” said the NHC director general, Mr Nehemia Mchechu, during the launching ceremony.

With an annual demand of 200,000 affordable homes, Tanzania is predicted to have a 3,000,000-unit housing shortfall.

As of June 30, 2022, the total amount of outstanding mortgage debt for the nation was Sh509.99 billion, up 1.24 percent from the previous quarter, according to the Bank of Tanzania.

According to the central bank’s most recent report: “The Tanzanian housing sector’s fast-growing demand is primarily driven by the country’s strong and sustained economic growth with GDP growth averaging 6 – 7 percent over the past decade, the country’s fast-growing population, which is expected to more than double by 2050, and efforts by the government in partnership with international non-profit organisations and foreign governments to meet the growing demand for affordable housing.”

According to the BoT, the availability of mortgages has increased the demand for homes. The number of mortgage lenders in the market increased from three in 2009 to 33 by December 2021, and the average mortgage interest rate decreased from 22 percent to 15 percent. Developers are still working to build housing complexes, with a particular concentration on Dodoma Capital City, where the government has moved its administrative offices.

NHC is carrying out a number of projects in diverse areas, including those for high-end and low-cost housing.

The need for homes in the nation, according to Mr Mchechu, is still great. He added that the corporation cannot meet this need on its own; instead, the private sector must be involved.

The policy will come under one of the four primary categories of joint venture agreements, such as Land as Equity, where NHC will just contribute land and the partner will be responsible for providing the necessary financing for the project’s completion.

Upon completion, NHC will hold a 25 percent stake in the company. This percentage will increase to 50 percent after 10 years and, depending on the type of arrangement chosen, either 60 percent or 75 percent after 15 years.

In the second kind of joint venture, referred to as Land and Finance as Equity, NHC will contribute both land and a portion of the financing. A special purpose vehicle (SPV) in the form of a company, whose sharing structure will be decided by the amount of equity supplied by each partner, will be used by the two parties to negotiate the shareholding structure.

According to NHC, projects falling under this category must have a value of at least Sh50 billion and a payback period that is no longer than 12 years. The third joint venture is referred to as a “Revenue Sharing Model,” where NHC and the partner will construct, market, and ultimately split revenue according to pre-determined percentages.

NHC has stated that its only contribution will be land, but that its revenue share must at least equal the land’s worth.

The fourth arrangement is referred to as a “long-term lease model,” in which NHC leases a plot for an extended period of time, the partner develops and manages the property for a maximum of 30 years, and then NHC receives the land back.

Prime Minister Kassim Majaliwa stated the NHC’s decision is critical to fostering more collaboration between the public and private sectors in carrying out development projects while speaking at the inaugural event.

Continue to emulate industrialised nations so that you can construct nicer homes, he said. “NHC has a huge power to modify the appearance of cities.”

According to him, the housing shortage has caused some people to raise their rent prices and occasionally ask for longer lease terms.

“That is a problem for persons with low incomes. Every Tanzanian will be able to afford a home thanks to our relationship, he continued.