Tanzania: Mortgage firm plans to team up with pension schemes

A dream to own a home for most salaried Tanzanians will become a reality as long as the Tanzania Mortgage Refinance Company Limited (TMRC) plan to team up with social security schemes is implemented.

The absence of a mortgage financing system has adverse effects on the country’s economy as the majority of people have been forced to build houses incrementally using their own savings. The TMRC Chief Executive Officer, Mr Rished Bade, said that collaborating with pension funds was one of the institution’s priorities to enable workers access housing loans at affordable cost.

“Likewise the plans are underway to work with private developers to broaden investment opportunities,” he said in a telephone interview in Dar es Salaam recently. Analysts in the real estate development estimates that it takes up to 10 years for an average Tanzanian family to build a house using its own savings, tying up substantial capital.

Most banks in Tanzania were hesitating to start mortgage financing, while overall lending rates remained high. TMRC is a financial institution owned by commercial banks in support of mortgage lending in the country. Through TMRC lending, commercial banks get the loans at 10 per cent interest rate, the relief that is expected to be passed over to final consumers.

There are five pension funds in the country — Public Service Pension Funds (PSPF), Local Authorities Pension Fund (LAPF), Government Employees Provident Fund (GEPF), National Social Security Fund (NSSF) and Parastatal Pension Fund (PPF).

The Parliamentary Finance and Economic affairs Committee Chairperson, Dr Abdallah Kigoda, said in Dar es Salaam over the weekend that pension funds could be an important investment partner due to its boldness financially as well as being among largest investors in real estate development.

“Both parties will become beneficiaries but more importantly low and middle class employees from public and private sectors, who have been victims of the skyrocketing costs of homes,” he said.

He said the project is feasible as already 2 million US dollars (about 3.2bn-) out of 40 million US dollars (about 64bn/-) given by the government to the TMRC has been allocated to carry out a study on the low cost housing loans and increase the number of beneficiaries.

The parliamentary committee insisted on the TMRC to ensure the housing finance benefits the needy and evade greedy businesspersons from meddling the project for personal gains. “TMRC should enhance awareness creation to all citizens on the benefits of the project for their wellbeing,” he added.

For years Tanzania has been without the mortgage financing system, compelling majority people to opt for the most difficult alternative of building houses incrementally through own savings. The parliamentary committee challenged TMRC to consider possibility of lowering cost of finance for the low income earners access affordable and long term housing credit facilities.

“This is possible when TMRC goes to the public like issuing bonds to raise low cost capital,” he said. Currently, about 18 per cent VAT is being charged on prices of residential houses thus backpedaling progress made by the infant real estate industry.

The TMRC has disbursed housing loans totaling (1.56 million US dollars) 2.5 billion since it became operational in October last year, while its members commercial banks have injected sum of 2.05 million US dollars (about 329bn/-) since investment in the sub sector began.

Commercial banks with stake in the company are CRDB Bank, NBC, NMB, Exim Bank, Azania Bank, Tanzania Investment Bank (TIB), Banc ABC, Dar es Salaam Community Bank (DCB), NIC Bank and People’s Bank of Zanzibar (PBZ).

By SEBASTIAN MRINDOKO, T