Mortgage loans grow by 7 per cent

The value of mortgage loans has grown by 7.01 per cent year-on-year pushed up by competition, creativity and low-interest rates.

The value of the outstanding mortgage loans increased to 522.95bn/- at the end of September compared to 509.99bn/- in a similar period last year.

Tanzania Mortgage Refinance Company (TMRC)’s latest report showed that 32 different banks are offering mortgage loans dominated by five top lenders, commanding 64 per cent of the market share. CRDB is the leader controlling 37.07 per cent.

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

According to TMRC, these products are competing with the mortgage in terms of loan amount and, to some extent, tenor as they are offering consumer loans for a period of up to seven years amounting to around 120m/-, enough to buy a housing unit.

“The Tanzania housing sector’s fast-growing demand is mainly driven by the strong and sustained economic growth with GDP growth averaging 6 -7 per cent over the past decade,” TMRC said.

Also, the fast-growing population, which is estimated to more than double by 2050, is pushing the demand up while the government, in partnership with global non-profit institutions and foreign governments, continues to meet the growing demand for affordable housing.

The report issued on Monday said further the interest rates on mortgage loans improved from 22 – 24 per cent in 2010 to 15 – 19 per cent today though are still relatively high, negatively affecting affordability.

CRDB is followed by far by Stanbic Bank which commands 8.11 per cent at the end of September, Azania Bank 7.34 per cent, NMB Bank 7.25 per cent and Exim Bank 4.50 per cent.

In a quarterly basis, the average mortgage debt size was at 87.27m/- marking a slight increase from 82.56m/- in the previous quarter.

Also on a quarterly basis, the mortgage market registered a 2.54 per cent growth in the value of loans as at end of the third quarter compared to the 1.24 per cent growth recorded in the previous quarter.

Nevertheless, the ratio of outstanding mortgage debt to GDP increased to 0.30 per cent compared to 0.29 per cent recorded in the previous quarter.

However, despite the mortgage market’s good trend the  growth mark is facing some setbacks including cumbersome processes around the issuance of titles, especially unit titles, which continue to pose a challenge by affecting borrowers’ eligibility to access mortgage loans.

According to the report, the mortgage market is not fully catered to the country’s population from accessing housing finance to improve their housing opportunities, microfinance segment being under-privileged due to lower levels of income, and lack of access to the formal financial system and informal housing.

In support of mortgage market growth in microfinance sector, TMRC in collaboration with Habitat for Humanity International is setting up an initiative to extend mortgage loan outreach to the microfinance sector.

The two institutions have signed a Memorandum of Understanding as a first step in the organizations’ joint effort to expand and strengthen the low-income housing finance sector in the country.

The initiative is at the research phase and its implementation will provide a tailor-made infrastructure to reach this economic segment to include them in decent and affordable homes.