Tanzania Real Estate Sector Report

While the Tanzania real estate sector is not as highly developed as the construction sector, the developments within the construction sector have benefited the Tanzania real estate sector through the creation of additional real estate space. 

The Tanzanian real estate sector has not made significant contributions to the GDP over the last few years, but the government remains optimistic that the recent and planned developments will contribute to the continued growth of this sector. 

The current development projects that are under way, as well as those that are being planned, have created opportunities for interested investors. 

Today, the largest market for investors in the real estate sector can be found in office development, but there are also some opportunities in the development of retail, industrial and residential spaces as well. 

Knight Frank, a UK headquartered global property consultancy agency and a large investor in the Tanzania real estate market has projected that the demand for office, retail and industrial real estate in the capital city of Dar es Salaam will remain strong. 

In addition to this development, there is the pending passage of legislation that would govern estate agencies, the already amended Land Act, a court to arbitrate land disputes and plans to institutionalize housing financing. 

With these developments in place, the government continues to be hopeful that the real estate sector in Tanzania will begin to actively contribute to the GDP; it has taken several steps towards regulating the sector and the outlook remains promising. 

The real estate sector is managed by the Ministry of Lands and Human Settlements Development through the National Housing Corporation (NHC), a parastatal company which is completely government owned and which both develops and maintains a variety of properties. 

The NHC was first established in 1962, but was reorganized and restructured into its present state by an Act of Parliament in 1990. 

The mission of the NHC is to provide and facilitate conditions of high quality housing and other buildings in Tanzania for public, residential or commercial use. 

The primary functions of the NHC include property management, construction of houses for sale, contract business and consultancy services. 

Accordingly, in addition to constructing low and medium cost housing for sale and for rent in urban areas, the NHC is seeking to become a leader in the real estate management and development of the country. 

In October of 2006, the NHC owned 10,790 residential units and 5,231 commercial units. 

In 2006, the total value of these units was estimated to be TZS 172,678,098. 

Of these units, 60% were located in the capital city of Dar es Salaam, which is in line with the increasing demand for housing in the urban areas within Tanzania, and were valued at TZS 168,552,369,379.38. 

Another Tanzania government agency actively involved in the growing Tanzania real estate sector is the Tanzania Building Agency (TBA). 

The Tanzania Building Agency was established in 1997 and was originally placed under the Ministry of Works, but was later reorganized under the Ministry of Infrastructure Development. 

The purpose of the TBA is to provide housing accommodation to the public servants and to build consultancy services to the government and its departments while also employing efficient and effective use of its resources. 

According to Architect Makumba T. Kimweri, Chief Executive of the Tanzania Building Agency, the mission of the TBA is similar to that of a real estate dealer. 

“We build houses, we sell houses,” he says, “and the money from that will build more houses.” 

However, Kimweri says that the agency is not currently able to meet the needs of its large customer base. 

“Up to now, the agency is capable of building only about 250 houses every year,” says Kimweri, “but our customers are about 350,000 in total. As you can see, the gap is very big."

In order to solve the problem, the TBA has developed a plan to share in the development of housing through a joint-venture with parastatals or other private investors. 

“The investors want to build apartments,” he says. “They are going to run it, but we have a 25% share of whatever they install there.” 

In addition to the 25% share, Kimweri says that the agency has the option of buying up to 50% of the building within two years. 

The TBA has the largest construction unit for government use and is capable of doing any type of construction work. 

Because the TBA is a government agency and, because land can only be owned by the government, potential investors will be protected from any land concerns. 

Tanzania Real Estate Sector Investment Opportunities
 real estate sector is currently small and underdeveloped, but the developments of construction services as well as increases in population growth have created a demand for real estate and the sector is, therefore, primed for investment.

As Architect Makumba T. Kimweri, Chief Executive of the Tanzania Building Agency spells out, there are many investment opportunities in real estate in Tanzania. 

Most people don’t realize the pace of development that’s happening here [and] I invite them to come and see for themselves

“Most people don’t realize the pace of development that’s happening here [and] I invite them to come and see for themselves,” he says.

“Our country is still virgin, so there are lots of opportunities, such as those in the housing sector,” he adds, “we need many houses and we need a lot of construction.”

The real estate sector is not only attractive, but also open and welcoming to interested investors, as Architect Kimweri explains, “the first thing for foreign investors should realize is the peaceful atmosphere in Tanzania.”

Currently, the real estate sector appears to be on the verge of joining the construction industry as a prosperous and booming sector, mainly in the larger cities of Dar es Salaam and Arusha, particularly in the development of the office space. 

Dar es Salaam Real Estate Investment Opportunities
Dar es Salaam is Tanzania’s largest city and business capital, with a population of around 2.5 million.

Though Dar es Salaam lost its official status as capital city to Dodoma in 1996, it remains the centre of the permanent central government bureaucracy and continues to serve as the capital for the surrounding Dar es Salaam Region.

Its status as both an administrative and trade centre has put Dar es Salaam in a position to benefit disproportionately from Tanzania's high growth rate in the recent years and is currently the most vibrant city in the Tanzanian real estate market. 

Office Space The leading office space locations in the commercial city of Dar es Salaam have moved from the Central Business District (CBD) to the Gardens Area, east of the CBD.

The move was primarily a result of heavy traffic congestion.
The demand for quality office spaces has steadily increased over the last two years, along with rental values.

There are currently many proposals to build new developments as well as to refurbish old spaces and to convert residential buildings into office space.

The shift in capital cities from Dar es Salaam to Dodoma has created a demand for office space in Dodoma as well, but has not impacted the demand in Dar es Salaam.

According to estimates by Knight Frank LLP, a global development and real estate firm in Tanzania, the current rent prices for office space in prime locations are approximately US$19 per square meter per month with a yield of 12%. 

Retail Space The development of real estate in the retail market in Dar es Salaam is extremely low.

Partially as a result of population growth and increased living standards, the abilities of the sector have not been able to keep up with the demand.

Currently, approximately 80% of retail transactions occur within the informal street trading sector.

However, Tanzania’s first large purpose built retail shopping mall was opened in November 2006 in Mlimani City, located just outside of Dar es Salaam.

The project included a conference center, a shopping mall, a hotel and office parking.

Demands for similar structures are expected to gather speed in the near future.

Knight Frank LLP estimates that the current rent prices for retail space in prime locations are approximately US$12 per square meter per month with a yield of 13.5%. 

Industrial Space There is a limited supply of quality industrial space in Dar es Salaam which, combined with the strong economic growth in Tanzania and in Dar es Salaam, maintains the demand high.

The attractiveness of Dar es Salaam’s industrial space is heightened by the affordable rent prices.

According Knight Frank LLP, the current rent prices for industrial space in prime locations are approximately US$5 per square meter per month with a yield of 15%.

Nyerere Road and Chang’ombe feature the most well established industrial areas. 

Residential Space 
The Dar es Salaam residential real estate market is well established but not very sizable.

The major residential areas are located oceanfront properties.

The supply of quality residential properties is limited and this shortage has helped to keep the prices relatively high in comparison to other African cities.

Knight Frank LLP estimates that the current rent prices for residential space in Dar es Salaam are around US$4,000 per month with a yield of 12%. 

Arusha Real Estate Investment Opportunities

The northern city of Arusha is the capital of the Arusha Region and has a population of about 300,000.

The primary industry of the region is agriculture, with large high-quality coffee and flower production exported to Europe.

Tourism is also at the core of Arusha’s economy, with the city playing host to numerous safari companies, hotels and lodges that cover the surrounding regions that include world famous destinations such as the Serengeti national park and Mount Kilimanjaro.

Furthermore, the city of Arusha has become increasingly important in the region as the headquarter of the East African Community, an intergovernmental organization with plans to form a country called the East African Federation by 2010 with a single President ruling over the current member countries of the EAC, namely Kenya, Tanzania, Uganda, Burundi, and Rwanda.

In addition, the International Criminal Tribunal for Rwanda (ICTR) is also currently being held in Arusha and an assessment of the level of impact that the presence of the ICTR has had on the economy in Arusha has revealed a significant inflow of cash into the local economy, estimated to have been about US$ 60 million between 2002 and 2004.

The real estate sector has greatly benefited from such economic boosts of the recent years, with a constant increase in the number of houses and hotels being built in Arusha and with new plans to develop new housing and shopping areas.

An example of these developments is the recent master development plan of the Kilimanjaro Airports Development Company (KADCO), the first public operated infrastructure to be privatized in Tanzania, and the getaway to the northern zone of the tourism industry in Tanzania.

As Mr. Arnold Kilewo, Chairman of the Kilimanjaro Airports Development Company (KADCO) unveils, “we want to establish around Kilimanjaro International Airport duty free and export processing zones, special economic markets and industries.”

“Also, we want Kilimanjaro to be the centre of horticulture business in Tanzania,” says Mr. Kilewo, “We are going to develop Kilimanjaro international Airport as […] a small self-contained city with attraction to put light industries, duty free zones, hotels, golf courses and conference centres.” 

We are going to develop Kilimanjaro international Airport as […] a small self-contained city with attraction to put light industries, duty free zones, hotels, golf courses and conference centres

Conferences are, indeed, a growing sub-sector in Arusha, with centres such as the well established Arusha International Conference Centre (AICC), which is fully government-owned, but which operates without subsidies from the government as a mature commercial entity.

Arusha International Conference Centre is currently welcoming investors from the fields of equity investment and the procurement of project finance funding, to assist them in the project of developing a proposed four or five star hotel which will be located 3 kilometers from the center of Arusha town. 
Tanzania Real Estate Legal Framework

Land development has become increasingly important in the Tanzania real estate sector as more real estate projects are being developed.

The implementation plan for the Land Act of 1999 was recently completed, to provide for the legal framework in relation to the management and administration of the land and the settlement of disputes.

All of the Tanzanian Ministries as well as the public and private institutions work together in order to ensure the efficient implementation of the national land policy.

Under the 1999 Land Act, all land in Tanzania belongs to the state; however, land can be owned by individuals in three different ways.

The first, is through a government granted right of occupancy.

The second is through the Tanzania Investment Center (TIC) derivative rights.

The third is through sub-leases created from a granted right of occupancy.

Derivative rights and rights of occupancy are granted for both short term and long term periods.

Rights of occupancy are renewable up to 99 years.

Although in Tanzania, land is owned by the government and investors can only lease land for several years, joint-ventures with local counterparts give access to further investment incentives. 

Prospective investors can gather more detailed information directly from the Tanzania Investment Centre (TIC) at www.tic.co.tz