Tanzania Mortgage market grows by almost 50 pct in 2013, say BoT

The mortgage market in Tanzania has been growing steadily with the picking up of the pace of housing investment, the Bank of Tanzania (BoT) has said’

 

In its Tanzania Mortgage Market Updates for December 2013, it said as at December 31, 2013 the total lending by the banking sector for the purposes of residential housing was 156.50bn/-, which was equivalent to USD96.8m, representing an annual growth of 46 percent. 

 

The total number of mortgage loans also grew rapidly, from 1,889 at the beginning of 2013 to 2,784 by end of December 2013, being an increase of 47 percent, it said.

 

The updates attribute the increase in the  favourable interest rate environment during the year as well as awareness on mortgage loans among borrowers, public awareness campaign by major banks and the launch of mortgage loan products by CRDB Bank Plc, Exim Bank and other TMRC member banks that did not such a product as the major contributing factor.

 

 As at the end of December 2013, 19 different banking institutions were offering mortgage loans, with the number expected to increase even further as more lenders continue to launch more products.

 

The mortgage market was dominated by three top lenders, who among themselves command about 67 percent of the mortgage market.

 

Azania Bank, which has the longest presence in the mortgage market, was a market leader commanding 24 percent of market share, closely followed by Stanbic Bank with about 21 percent of the mortgage market share.

 

According to the updates, the market experienced new entrants and there are prospects that large banking institutions such as NBC and NMB will enter the mortgage market as competition in the traditional banking products continue to intensify.

 

Demand for housing and housing loans remains extremely high but is constrained by inadequate supply of affordable housing and high interest rates.

 

The recent rise in the T-Bills rate to 15 percent (those with a maturity of 182 days) will have a negative impact on affordability of all forms of long term debt, including mortgages. Typical interest rates offered by lenders vary between 18 percent and 21 percent.

 

Most lenders offer loans for home purchase but increasingly different products are emerging such as loans for self-construction and for equity withdrawal, which continue to be expensive and beyond the reach of the average Tanzanian.

 

The construction of new houses by the National Housing Corporation (NHC) over the next three years will have a positive effect on the mortgage market as most of these will most likely be priced at affordable levels.

 

Likewise new schemes such as the Civil Servants Housing Scheme which is expected to build 50,000 affordable houses in the next 5 years have the potential to boost the mortgage market even further.

 

Most pensions funds are also actively engaged in advancing mortgage loans to their members, something which will further boost the mortgage market in Tanzania.

The government has also continued to demonstrate its commitment to ensuring the Tanzanian populace has access to affordable housing.

 

 The recent launching of a project for construction of 10,000 houses under the Tanzania Building Agency (TBA) by the Vice President is a clear demonstration of such commitment, and it will boost further growth of the mortgage market.

 

The Tanzania mortgage market as compared to the East African neighbours still has a relatively smaller mortgage market, although it is growing rapidly. 

Mortgage debt outstanding as a proportion of Tanzania’s GDP was equivalent to around 0.36 percent of which is lower than its East African neighbours.

 

Average mortgage debt outstanding as a proportion of GDP for EU countries (which is normally taken as a reference point) is 50 percent.

 

Average loan size as at December 31, 2013 was 62m/- , which is equivalent to USD38,000, the  average loan size for last year compares unfavourably with that of 2012 which was73m/- .

 

The average loan size across mortgage lenders varied greatly, reflecting different strategies and customer bases. 

 

Akiba, EFC and DCB who target lower income customers had much lower average mortgage loan sizes than Stanbic Bank whose average loan size was 300m/- .

 

Currently refinancing and pre-financing mortgages advanced by TMRC to banking institutions is equivalent to 11 percent of total outstanding mortgage debt, the updates show.