Tanzania Real estate Industry

Tanzania Real Estate Industry

Tanzania real estate sector has been growing sensibly in the recent years accompanied by a strong and sustained economic growth.

Averaging 7%, a fast growing population of 50 million and big effort by the government in partnership with global non-profit institution and foreign government, to meet growing demand of affordable housing.

The Tanzanian housing sector’s fast-growing demand is mainly driven by the fast-growing Tanzanian population which is estimates to be 53.47 million and that is expected to more than double by 2050. The Tanzanian housing demand has also been boosted by easier access to mortgages, with the number of mortgage lenders in the market increasing from 3 in 2009 to 21 in 2015 and the average mortgage interest rate in Tanzania falling from 22% to 16%.

“Dar es Salaam, Tanzania’s commercial capital and Africa’s fastest growing city, has a current population of about 4.3 million which is expected to quintuple to about 20 million by 2050.”

The developments within the Tanzanian construction sector have positively influenced and benefited Tanzania’s real estate and housing sector through the creation of additional real estate space.

The current real estate development projects that are under way, as well as those that are being developed, have created various opportunities for interested local and foreign investors. The Tanzanian housing sector’s fast-growing demand is mainly driven by the fast-growing Tanzanian population which is estimates to be 53.47 million and that is expected to more than double by 2050. The current demand for housing in Tanzania is estimated at 200,000 houses annually, and a total housing shortage of 3 million houses.

 

PROPERTIES

The value of Tanzania’s properties accounted for 3.7% of the country’s GDP (USD1.8b) in 2014, compared to USD1b in 2009, representing an increase of 63%.

The increase is mostly driven by the increasing demand for urban accommodation and the fast-growing Tanzanian population. Currently (2016), the population of Tanzania is estimated to be 54.85m and is expected to more than double by 2050. The development of properties in Tanzania is mostly focused on the commercial capital Dar es Salaam, but also on other major urban centers such as Mwanza, Arusha and Mbeya, due to growth in agriculture, mining and tourism sectors

The demand for properties in Tanzania is estimated at 200,000 houses annually, which results in a current housing shortage of 3m houses.

Alternative building materials are being explored as a way to deliver these houses on a rapid scale, according to the Centre for Affordable Housing Finance in Africa (CAHF). The Tanzanian housing demand has been boosted by easier access to mortgages, with the number of mortgage lenders in the market increasing from 3 in 2009 to 21 in 2015. The average mortgage interest rate in Tanzania fell from 22% to 16% during the same period.

Tanzania Housing Properties Rentals Property rentals in Tanzania are higher than those found in Kenya’s capital, Nairobi for example where a one-bedroom apartment in the city center can be rented at around USD 444.5 a month while in Dar es Salaam it is at an average of USD 775.3 a month. Out of the Dar es Salaam city center, to rent a one-bedroom apartment can cost up to USD 514.34 a month. Tanzania Housing Properties Price Housing price per square meter averages USD 1,200.

In Dar es Salaam versus USD 1,235 in Nairobi according to Numbeo, an online source of statistics on quality life topics by cities and countries. Out of the Dar es Salaam city center, the average cost per square meter is USD 608.17. Tanzania Commercial Properties Tanzania’s commercial properties has experienced a strong investment during the last years raising the commercial buildings supply in urban centers. As a result, the supply of real estate projects built for commercial purposes as offices or stores has grown at a faster rate than the growth in demand for these properties. Consequently, the retail/commercial property sector currently holds an excess supply of 310,000 square meters.

Tanzania’s commercial properties has experienced a strong investment during the last years raising the commercial buildings supply in urban centers. As a result, the supply of real estate projects built for commercial purposes as offices or stores has grown at a faster rate than the growth in demand for these properties.

Consequently, the retail/commercial property sector currently holds an excess supply of 310,000 square meters. The establishment of new businesses has been also a driver of growth in demand for retail/commercial property due to Tanzania’s steady growth in the last ten years at an average rate of 7% per annum according to UK Trade & Investment. Tanzania Properties Project: The PSPF Towers In 2015, the Public Service Pensions Fund (PSPF) of Tanzania completed its major properties project,

the PSPF Towers, which are the tallest buildings in the country and the 5th tallest buildings in Africa. The Towers are located in Dar es Salaam and offer for sale 2 types of apartments: normal apartments and duplex apartments. For 3 bedrooms apartments, the price ranges between USD 350,000 to USD 500,000, inclusive of VAT at 19%. For offices in the PSPF Towers, the price is USD 2,200 per square meter. Only the ground floor and mezzanine are available for rent for shops and other commercial activities.

BUYING PROPERTIES How difficult is the property purchase process in Tanzania?

The state owns all land in Tanzania. Therefore, there is no private ownership allowed for both citizens and non-citizens.

Nevertheless, the Government grants rights of occupancy of land and derivative rights. A right of occupancy is valid for 5-99 years, renewable. A derivative right, on the other hand, can be held for 5-98 years. For a foreigner to obtain a right of occupancy, she/he is required to be granted first a Certificate of Incentives by the Tanzania Investment Centre (TIC).

There is also the option of obtaining sub-leases on land, which has been granted to the private sector through a right of occupancy.

Foreigners can only occupy land for investment purposes. There are several ways to be permitted occupancy on land: through obtaining derivative rights from the TIC, application to the Commissioner for Lands, sub-leases, licenses from the Government, and purchasing from holders of rights of occupancy.

Rights of occupancy are transferable, on the condition that it is to be transferred to a foreigner, to be used for investment purposes, with permission from the TIC.

If the foreign investor opts to purchase from a holder of a right of occupancy, a lawyer’s services is needed for the process. The lawyer drafts a Sale Agreement and the seller provides the necessary documents that confirm she/he has a right of occupancy on the property in case and it is clear of any encumbrance.

The notarized Agreement is taken to the Land Office, where the buyer pays for the necessary taxes and fees to have his/her name recorded at the Land Registry. The lawyer also prepares a Transfer Deed, which is submitted to the Municipal Land Office with the Sale Agreement. A Certificate of Occupancy is then sent to the buyer.

The round trip transaction costs include all costs of buying and then re-selling a property – lawyers’ fees, notaries’ fees, registration fees, taxes, agents’ fees, etc.

Notary Fee

Approximately 3% of the property value. Notary fee is negotiable, but it is regulated and it cannot go higher than 10% of the property value.

Stamp Duty

Stamp duty is levied at 1% of the property value.

Registration Fee

Registration fee is around 0.25% of the property value.

Valuation Fee

Valuation fee is around 0.10% of the property value. The official valuation fee formula is: (Property Value – 200,000) * (1.25/1,000) + 550 + valuation approval fee of 0.01% of property value.

 

RENTING PROPERTIES

What is the cost of living in Dar es Salaam, Tanzania?

Well it all depends with people really! And place to place …there are place where it’s really costly living at places like upanga, oysterbay, masaki, posta etc. where it’s in the city so things are pricey …however there are fixed costs like the cost per unit of electricity which is around 370/unit approx. 0.16$ and cost per unit of water which was 1663tshs/1000liter roughly 0.75$ …other costs

Housing (rent) 2bedrooms, a kitchen and living room = *250,000tshs/pm

Hint: this is not an apartment! Apartments cost more like 600$/pm these prices are of different hotels located at upanga!

Food = let’s say 3 meals per day plus drinks *30,000–*45,000tshs/day that’s already made food. And abit luxurious spending! E.g. marry brown, best bite, KFC, etc.

Clothes let’s say you choose to spend like 500$/month on clothes, because there are markets, malls and other places where they sell on higher prices e.g mlimani city mall, woolworth, city mall,

Let’s put aside some amount for daily transportation expenses like taking a cab, UBER BRT and/even Daladala 150$/pm. So i guess that’s the real cost of living in here! That’s if you choose to live near town

If you live far from town. There are relatively much reduction on costs of living!

Something like rent can be bumped to 45,000-*150,000tsh depending on how big and quality the house is.

Food also can be cheaper …aside from spending all that you might spend close to *25,000tsh/day

Clothes can be up to 100$/month depending on where you are shopping at!

Also Transportation can be reduced to even 100$/pm

Assumptions

1. ER 1$ =2276tsh
2. A single person not with family and not married
3. All other factors remain constant, fluctuation, political stability, and weather variation being as sunny as it is
4. A person has health insurance covered by an employer.

In Dar-Es-Salaam the cost of living is not quite expensive for an ordinary person with an ordinary life and job then this is the list of income incurred and expenses covered.

Income incurred for an ordinary educated person is a net of 1,000/= (daily)

• Clothing 300,000/=tsh (annually)
• Housing 100,000/= tsh(monthly)
• Food 5,000/=tsh (daily)

And a deducted amount of money that will be paid for all form of taxes and insurance like health insurance together with things like pension contributions and development tax that is currently activating

The cost of living in dar es salaam Tanzania is awesomely for those who have employed, and too tightly for those unemployed you must struggle to the Maxim in order to have better life, we have scarcity of employments.

 

MORTGAGE LOAN

Mortgage loans value increased by 11.3% in Q1 2017 as compared to Q1 2016.

This is lower than 34% achieved in Q1 2016 as compared to Q1 2015.  The number of banks reporting to have mortgage portfolios increased from 27 banks in Q1 2016 to 29 banks reported in Q1 2017 an increase of 7.4%. An increasing trend was also noted in Q1 2016 in which 27 banks were reported as compared to 29 banks reported in Q1 2015, a significant increase of 35%. · Number of banks reporting to have mortgage portfolio increased.

 

Mortgage Market Growth

The mortgage market in Tanzania has registered an annual growth rate of 11.3 percent through March

2016 to March 2017. As at 31st March 2017 total lending by banking sector for the purposes of residential housing was TZS 416.85 billion, which is equivalent to US$186.5 million. This represents a very slight decline of 0.02 percent from total mortgage lending of TZS 416.94 billion as at 31st December 2016.

The Flat growth in Q1 2017 as compared to previous quarter (Q4 2016) could be attributed by the changes market conditions which are temporary and envisaged to improve in the near future.

Overall year on year (March 2016 to March 2017) growth of 11.3% has been attributed to factors such as increased awareness on mortgage loans among borrowers as a result of various public awareness campaigns by banks offering the mortgage loan product and other awareness creation initiatives under the Housing Finance Project (HFP) Further, increased competition as new lenders enter the market i.e. 3 new lenders have entered the market since March 2016) has also contributed positively to the observed growth.

Figure 1 below shows the trend of mortgage lending in terms of amounts over the years.

Number of local banks offering mortgage loan I’e NMB, NBC, CRDB, FNB, BARCLAYS, LETSHEGO and so many financial institution.