Why the private sector is avoiding the Tanzania real estate market

Dar es Salaam. Despite facing an annual housing demand of around 200,000 units per year, the private sector’s appetite for Tanzania’s property development remains low.

This, developers say, is due to a number of factors, including the absence of a clear definition of what an affordable housing project entails, financial obstacles, unfavorable policies and difficulties in acquiring land.

In the wake of such challenges, developers now say the government should address them to boost private sector interest in meeting demand.

Currently, only three state institutions are developing affordable housing, including the National Housing Corporation (NHC), Watumishi Housing Investment (WHI) and the Tanzania Construction Agency, which together build only 5,000 houses per year.

With little investment in the sector, the 2022 Population and Housing Census shows that the real housing gap has widened from three million in 2012 to 3.8 million houses in 2022.

A property management strategist, Andrew Kato, recently told The Citizen that several challenges were deterring the private sector from participating in affordable housing development.

These, he said, include the lack of a housing policy to help provide guidance and the lack of tax incentives such as the elimination of Value Added Tax (VAT) for the sale of houses by the government. The incentive, she said, could attract investors and allow them to earn a return on their investments.

“We lack a clear definition of what constitutes affordable housing. For example, we see houses selling for Sh70 million, making it impossible for someone earning minimum wage to be able to afford a house and still have enough left to live on. That is why we believe that housing policy needs to establish a precise definition,” he stressed.

Kato added that the real estate sector can contribute greatly to the growth of national income, but the type of affordable housing needs to be defined.

Watumishi Housing Investment (WHI) CEO Dr Fred Msemwa said the main challenge facing the provision of affordable housing in Tanzania and the wider East African region is the limited availability of construction finance, which limits the number of houses that can be supplied on the market.

Similarly, the lack of developed land increases the cost of housing, as developers have to incur costs for infrastructure services such as roads, electricity and water, making housing prices too high for ordinary citizens can afford them.

The land acquisition process remains a challenge, despite the good work the government continues to do to streamline it.

“The real estate industry is just recovering and we are in talks with potential investors to join forces and jointly deliver some housing units,” he said.

He said that so far, WHI has built 1,003 houses in 19 regions across the country and there are plans to embark on the second phase of construction of 500 housing units in the cities of Dodoma and Dar es Salaam.

Furthermore, starting from the new financial year, we will implement the Public Servants Housing Scheme (PSHS) by building houses in districts to serve public servants working in schools and health centres.

For his part, NHC Director of Information and Public Affairs, Mr. Muungano Saguya, said that one of the main challenges in the provision of affordable housing in Tanzania is the availability of financing.

“Private sector participation is paramount to solving this challenge and therefore we have been encouraging the private sector to collaborate with NHC,” he said.

He said that, unfortunately, mainly the private sector has more appetite for mid- and high-end developments, adding that NHC will continue to encourage and attract the private sector to invest in affordable housing.

Additionally, NHC has built around 30,000 affordable housing units in Tanzania by 2023 since its inception, mainly built under slum clearance schemes in major urban centers of district councils.

On the other hand, Vijay Contractors managing director Joseph Magida said many challenges are preventing the private sector from venturing into the affordable housing business, including land issues and lack of a housing policy that protects residents. low-income people.

Another challenge is the availability of funds. Banks are not yet ready to provide loans in that area and the interest rate is still high, so investors find that they cannot get a return on investment.

“We believe that the government is the main player in this area that can offer things that have attracted private investors; agrarian policy is unpredictable; conflicts increase all the time; “This spoils the appetite of many investors,” he stated.

Magida added: “Currently, the government is building low-priced houses and not affordable housing as mentioned because they do not reflect the lives of Tanzanians. The house is selling for between Sh60 million and Sh100 million, so how many can buy it?