Affordable Housing Finance
Affordable Housing Finance
Business Model Description
Provide project financing for the development and purchase of residential estates and commercial buildings through affordable and flexible mortgages targeting low-income communities outside of the formal banking system. The government allocates suitable l
Expected Impact
Provide safe housing to those outside of the formal banking system, and contribute to urban planning with improved health and environment management.
How is this information gathered?
Investment opportunities with potential to contribute to sustainable development are based on country-level SDG Investor Maps.
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Country & Regions
- Tanzania: Countrywide
- Tanzania: Central Zone
- Tanzania: Eastern Zone
Sector Classification
Infrastructure
Development need
Infrastructure is both a facilitator for development and an attractive investment channel. However, the sector is faced with persistent structural challenges, including a heavy dominance of inefficient parastatals in infrastructure provision, accompanied by a poor track record for privatization and private involvement in utilities in the past (1).
Policy priority
The government is committed to develop quality and reliable infrastructure that promotes socio-economic development of Tanzania. Particular emphasis is placed on the provision of quality and safe construction works of roads, bridges, ferries, airports, buildings, mechanical, electrical and electronics in collaboration with private stakeholders (2).
Gender inequalities and marginalization issues
Despite legal protection granted by laws and enforcement mechanisms, discrimination against women in accessing infrastructure and especially land persists in Tanzania. It emanates from the frequent application of customary laws, and an unfamiliarity with formal laws among local leaders and authorities (10).
Investment opportunities introduction
Tanzania's strong growth in real GDP from 4.1% in 2021 and 5.8% in 2022 is expected to promote significant development in infrastructure needs, including human settlement and particularly modern housing facilities as well as waste and agricultural storage solutions (5, 6).
Key bottlenecks introduction
The growth rate of urban areas in Tanzania has often been higher than the capacity of authorities to cope with the provision of basic services, including delivery of planned, surveyed and serviced land for housing development as well as waste management and horticulture infrastructure (7).
Real Estate
Development need
One of Tanzania’s greatest long-term developmental challenges has been providing citizens with access to decent and affordable housing especially for the lower and middle-income segments of the population. Over 40% of Tanzania’s urban population are living in informal settlements, lacking decent and affordable housing (4, 13).
Policy priority
The government seeks to work with the private sector in supporting the development of sustainable human settlements. The public sector's involvement in the enhancement of housing and other constructed facilities focuses on assisting in the mobilization of financial resources as well as capital investments (3).
Gender inequalities and marginalization issues
Challenges in accessing finance impose significant constraints on women’s productivity, including in real estate. Access to finance is the most common challenge faced by women entrepreneurs when starting and growing their own businesses (11).
Investment opportunities introduction
Real estate opportunities include the development and management of housing estates, residential apartments, office buildings, conference and banquet facilities, shopping malls, hotels, and the provision of home financing (6, 8).
Key bottlenecks introduction
Tanzania’s real estate market is dominated by individual home-builders and public agencies. The private sector, which caters for approximately 3.9% of the supply, is still at nascent stages and comprises of a limited number of actors, such as Avic, Nevada Properties, Estim, Group4 and Quality Group (9).
Real Estate
Pipeline Opportunity
Affordable Housing Finance
Provide project financing for the development and purchase of residential estates and commercial buildings through affordable and flexible mortgages targeting low-income communities outside of the formal banking system. The government allocates suitable l
Business Case
Market Size and Environment
> USD 1 billion
Housing deficit of 3 million units
Tanzania’s real estate sector contributed 3.1% to the country’s real GDP with USD 1.5 billion in 2019, compared to USD 1.2 billion in 2015, an increase of 25% (12).
Tanzania is experiencing rapid population growth of 3.11% annually and an urbanization rate of 5.22% This trend is expected to spur increased demand in housing and associated financing (9).
Tanzania's housing demand far outstrips supply. It has been increasing by about 200,000 units annually, with the current housing deficit estimated at about 3 million units (9).
Indicative Return
5% - 10%
Tanzania's real estate sector has rental yields averaging at 5.2%, 6.4% and 9.4% in the residential, office and retail sectors, respectively. The returns for affordable housing products are expected to be lower (9). The average rent for a 200 square meter property on the mainland is US 1,358 per month or USD 5-7 per square metre (16).
Mortgage interest rates in Tanzania range from 15-19%, down from 22-24% in 2010, which has led to an increase in mortgage uptake in the country (15).
Investment Timeframe
Long Term (10+ years)
Mortgage repayment periods under the Tanzania Mortgage Refinance Company (TMRC) were extended from five years to up to 25 years, and interest rates were brought down from above 21% to 15% per year. This can raise investor cashflow (13).
In Tanzania's real estate sector, the typical mortgage term is 20 years with some banks offering shorter or longer payment periods, between 10 years and 25 years (17).
Ticket Size
USD 1 million - USD 10 million
Market Risks & Scale Obstacles
Market - High Level of Competition
Market - Volatile
Capital - Limited Investor Interest
Impact Case
Sustainable Development Need
A rapid urbanization rate of 35.2% and a population growing at 2.93% per year present a challenge to Tanzania’s housing sector. The stringent conditions set by the large financial institutions has led to high dependence on non-mortgaged sources of housing finance (8, 29, 34).
Over 1.2 million houses in Tanzania, particularly in the urban centres, are built informally, often in unplanned settlements. This translates into a critical need for making serviced land available for shelter and human settlement development as well as providing requisite infrastructure and social services (8).
Over 40% of Tanzania's population in urban areas live in informal settlements, which are often associated with poor basic amenities. Unplanned settlements have inadequate service levels, tenure insecurity and poor hygiene and sanitation (8, 20).
Gender & Marginalisation
Gender inequalities and asset ownership and management has presented a challenge in the provision of flexible mortgage’s to low income communities outside the formal banking system in Tanzania (11).
Expected Development Outcome
Affordable housing finance contributes to Tanzania's goal of promoting sustainable human settlements. It leads to improved services, such as solid waste management, service delivery and access to sanitation and hygiene facilities with better environmental management (3, 11, 35).
Gender & Marginalisation
Affordable housing finance allows women to fully realize their right to adequate housing and expand their economic and business opportunities, including owning rented homes. The general poor urban population also benefits from opportunities to own decent housing (18, 19).
Primary SDGs addressed
11.1.1 Proportion of urban population living in informal, informal settlements or inadequate housing
Number of regularized properties in unplanned settlements estimated at 1,496,357 in 2020/21 (6). Percentage of land surveyed in 2020/21 estimated at 25% (6).
Number of regularized properties in unplanned settlements projected at 2,496,357 in 2025/26 (6). Percentage of land surveyed in 2025/26 projected at 37 (6).
1.4.1 Proportion of population living in households with access to basic services
The proportion of population using basic drinking water services estimated at 61% in 2020 (36).
The proportion of population using basic drinking water services projected at 85% in 2035 (36).
Secondary SDGs addressed
Directly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Public sector
Indirectly impacted stakeholders
People
Gender inequality and/or marginalization
Planet
Corporates
Outcome Risks
Affordable housing investments may trigger increased demand for services and public infrastructure upgrading programme beyond the capacity at which the municipal and town management authorities can afford (37).
Impact Risks
Communities living in unplanned settlements may be reluctant to move to new estates, as has been observed before, which may limit the expected impact (30).
The middle and upper class, which already have access to other means of financing, may oversubscribe and crowd out the low-income communities and hence reducing the expected impact (38, 39, 40).
There are cases of purported unwillingness of borrowers to service their loans and the difficulties that surround foreclosure, which may obstruct the expected impact (41).
Impact Classification
What
Affordable housing finance provides greater access to safe housing and contributes to urban planning with improved health and environment management.
Who
Low-income communities outside the formal banking system, basic service provides and providers, as well as the planet benefit from affordable housing finance.
Risk
While the affordable housing finance model is proven, the uptake, the potential for middle and upper class to crowd out the low-income communities and default of mortgage repayment require consideration.
Impact Thesis
Provide safe housing to those outside of the formal banking system, and contribute to urban planning with improved health and environment management.
Enabling Environment
Policy Environment
National Human Settlement Development Policy, 2000: Aims at improving access to land by all sections of the society and promote equity in land holding and increase efficiency in land administration (21).
National Construction Policy, 2003: Outlines government commitment to promote construction industry through private sector involvement and assisting in the mobilization of financial resources and promoting the optimum use of low cost and local building materials (42).
National Land Policy, 2016: Provides equal access to land for both women and men and recognizes the right of the most vulnerable and indigenous communities (23).
Financial Environment
Financial incentives: The government's Tanzania Mortgage Refinance Company (TMRC) provides medium- and long-term liquidity to mortgage lenders to offer families loans for new homes or improve their existing homes (13).
Other incentives: 0% import duty on project capital goods, including on building materials (28). The government may identify projects and grant special strategic investment status if the investment capital transaction is undertaken through registered local financial and insurance institutions (28).
Regulatory Environment
Land Act, 1998: Facilitates an equitable distribution of and access to land by all citizens and ensures that land is used productively within the principles of sustainable development (25).
Urban Planning Act, 2007: Provides for the orderly and sustainable development of land in urban areas; and offers to preserve and improve amenities, to provide for the grant of consent to develop land and powers of control over the use of land and to provide for other related matters (26).
Mortgage Financing Act, 2008: Declares that mortgage money shall be invested in. It also provides other guidelines such as the maximum aggregate amount which may be advanced and outstanding at any point in time, responsibility of the mortgagor, responsibility for applicants to give correct information, mortgage arrangements, among others (43).
Investment Promotion Act, 2004: Promotes and facilitates investment by assisting investors including in housing finance in obtaining the licences necessary to invest and by providing other assistance and incentives for related purposes (24).
Marketplace Participants
Private Sector
Tanzania Mortgage Refinance Company (TMRC), City Mortgage and Finance Corporation, First Housing Finance Tanzania Ltd, Mzalendo Credit Ltd, Night Frank, Cyton Real Estates, Gimco Africa Property Management Limited, Whiteknights Real Estate Investment Analysts Co. Ltd.
Government
Ministry of Urban Planning and Human Settlements, National Housing Corporation (NHC), Tanzania Building Agency (TBA), Ardhi University, Tanzania Mortgage Refinance Company (TMRC).
Multilaterals
World Bank Group (WBG), African Development Bank (AfDB).
Non-Profit
Tanzania Development Foundation, Ace Africa Developing Communities, Globalized and Enlightened Society Organisation, Centre for Community Initiatives (CCI), Sustainability in Action (SiA), Association of Real Estate Professional of Tanzania.
Target Locations
Tanzania: Countrywide
Tanzania: Central Zone
Tanzania: Eastern Zone
References
- (1) Tanzania Invest, 2022. https://www.tanzaniainvest.com/construction/realestate.
- (2) United Republic of Tanzania, 2021. Ministry of Works and Transport Strategic Plan.
- (3) United Republic of Tanzania, 2003. National Construction Policy.
- (4) International Journal of Advance Research And Innovative Ideas In Education, October 2020. Challenges Facing Real Estate Marketing and Its Impact on Economic Development in Tanzania.
- (5) African Development Bank, 2021. Tanzania Economic Outlook.
- (6) United Republic of Tanzania, 2021. Third National Five-Year Plan (FYDP 3).
- (7) International Journal of Social Science Studies Vol. 6, No. 12; December 2018.
- (8) Centre for Affordable Housing Finance in Africa (CAHF), 2019.
- (9) Cyton Real Estate, 2018. Dar es Salaam Market Research Cautious Investment.
- (10) Kerbina Joseph Moyo, 2017. Women’s Access to Land In Tanzania. The Case of the Makete District. Royal Institute of Technology (KTH) Stockholm.
- (11) University of Birmingham, 2018. Barriers to women’s economic inclusion in Tanzania.
- (12) Tanzania Invest, 2022. https://www.tanzaniainvest.com/construction/realestate.
- (13) The World Bank, 2020. Making Housing Affordable and Accessible with Market-based Solutions: Innovative Financing to Address Housing in Tanzania.
- (14) Ministry of Lands, Housing and Human Settlements Development, 2015. The Present Housing Challenge in Tanzania and Efforts Towards Provision of Affordable Housing.
- (15) Knight Frank, 2020. Tanzania Market Update.
- (16) Global Property Guide, Tanzania, 2005.
- (17) Centre for Affordable Housing in Africa, 2020. Affordable Housing in Tanzania, market Shaping Indicators.
- (18) Landresa, 2014. Women’s Land Rights Guide for Tanzania.
- (19) Fordham International Law Journal, 2011. A Home in the City: Women’s Struggle to Secure Adequate Housing in Urban Tanzania.
- (20) UN Habitat, 2009. National Urban Profile Tanzania.
- (21) United Republic of Tanzania, 2000. National Human Settlement Development Policy.
- (22) United Republic of Tanzania, 1997. National Land Policy.
- (23) United Republic of Tanzania, 2016. The National Land Policy.
- (24) United Republic of Tanzania, 2004. Investment Promotion Act No. 6.
- (25) United Republic of Tanzania, 1998. Land Act.
- (26) United Republic of Tanzania, 2007.Urban Planning Act.
- (27) PricewaterhouseCoopers, Tanzania, 2022. Tax Credits and Incentives.
- (29) Statistica.com, 2022. https://www.statista.com/statistics/455940/urbanization-in-tanzania.
- (30) Economic and Social Research Foundation, 2013. Policy Brief No. 4/2013. Challenges Facing Land Ownership in Rural Tanzania.
- (31) The Journal of Urbanism, No 26 Vol 1/2013. The Power of Informal Settlements, The Case of Dar es salaam, Tanzania.
- (32) The United Nations University World Institute for Development Economics Research (UNU-WIDER), 2017. Working Paper 2017/168, The effects of land Titling in Tanzania.
- (33) SDG Tracking Platform, 2022. https://sdg.tracking-progress.org/indicator/9-4-1-carbon-dioxide-emissions-per-unit-of-value-added/?tab=map.
- (34) Research Gate, 2010. Access to Housing Finance by the Urban Poor: The Case of WAT-SACCOS in Dar es Salaam, Tanzania.
- (35) Housing Finance Africa, 2022. https://housingfinanceafrica.org/countries/tanzania/a.
- (36) World Health Organisation/United Nations Children Educational Fund, 2021. Joint Monitoring Programme (JMP) for Water Supply, Sanitation and Hygiene, Tanzania Database.
- (37) Africa Housing Finance Yearbook, 2020.
- (38) Mkango, Adella, 2014. Overview of Housing Finance for Low Income Group In Tanzania A Case Of Dar Es Salaam City.
- (39) Tanzania Mortgage Refinance Company, 2002. Tanzania Mortgage Market Update.
- (40) Housing Development Financing Corporation (HDFC), 2018. Why Tanzania Mortgage Market Uptake Still Low.
- (41) FINMARK Trust 2010. Access to Housing Finance in Africa, Exploring the Issues, Tanzania.
- (42) United Republic of Tanzania, 2003. National Construction Policy.
- (43) United Republic of Tanzania, 2008. Mortgage Financing Act.