‘Low supply, high interests hinder housing sector growth’  

TANZANIA: INADEQUATE supplies of equitable houses and high interest rates charged on housing loans have been the major constraints in the growth of the housing sector despite the high demand for housing and housing loans.

According to Tanzania Mortgage Refinance Company (TMRC) market updates for the quarter ending last September most lenders offer loans for home purchase and equity release while a few offer loans for self-construction which continue to be expensive and beyond the reach of the average Tanzanians.

While interest on residential mortgages improved from 22 – 24 per cent in 2010 to 15 – 19 per cent offered today, market interest rates are still relatively high hence negatively affecting affordability.

Additionally, the report revealed recently showed that cumbersome processes around the issuance of titles particularly unit titles continue to pose a challenge by affecting borrowers’ eligibility to access residential mortgages.

Further, competition in the market has led to the emergence of other products that are impacting mortgage market growth as the products have favourable terms than mortgage products and are used for housing purposes.

The report said these products are competing with mortgages in terms of loan amount and to some extent tenor as they are offering consumer loans for the tenor of up to seven years amounting to around 120m/- an amount enough to buy a housing unit.

The competition comes from the ease with which competing products, specifically, consumer loans are available relatively easily compared to the lengthy process experienced in mortgage loans as well as additional costs in mortgage loans including registration and valuation fees as well as insurance costs which are not applicable in consumer loans.

The TMRC supports market growth through the provision of longer-term funds to members, a key element in the growth of the mortgage market in Tanzania continues to be the provision of long-term funding both in the forms of refinancing and pre-financing by the TMRC to facilitate Primary Mortgage Lenders (PMLs) matching their assets (mortgage) and liabilities (funding).

The mortgage market registered a 2 per cent growth in the value of residential mortgages as of last September as compared to the 6 per cent growth recorded in the previous quarter.

The market registered a 14 per cent year-on-year growth to 593.76bn/- in the quarter under review from 522.95bn/- in the corresponding quarter last year.

There was no new entrant into the mortgage market during the quarter. The number of banks reporting to have mortgage portfolios remained at 31 banks as of 30 September 2023.

Outstanding mortgage debt as of September increased to 593.76bn/- equivalent to 237.53 million US dollars as compared to 584.59bn/- equivalent to 249.92 million US dollars reported last June.

The overall average mortgage debt size as of September was 103.46m/- equivalent to 41,388 US dollars marking an increase from 102.13m/- equivalent to 43,662 US dollars reported in the previous quarter.

The ratio of outstanding mortgage debt to Gross Domestic Product (GDP) increased to 0.36 per cent compared to 0.33 per cent recorded in the previous quarter.

Mortgage debt advanced by the top five PMLs accounted for 66 per cent of the total outstanding mortgage debt.

Typical interest rates offered by mortgage lenders ranged between averages of 15 – 19 per cent.

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