TANZANIA is struggling to raise its mortgage finance ratio to GDP as it is lagging behind its peers in East African bloc. The mortgage ratio per GDP stands around 1.0 per cent at the end of March in 2017, which is
lowest in the East African Community (EAC) bloc, according to Housing Finance in Africa 2017 yearbook.
However, Central Bank data shows that house loan per GDP stands at 0.43 per cent at the end of March last year. The ratio of outstanding mortgage debt to Gross Domestic Product (GDP) stood at 0.43 percent (0.46 percent as at 31 December 2015), the Central Bank said in Tanzania Mortgage Market update of June 2017.
The second lowest rate in EAC member states is Burundi with slight over 1.0 percent followed by Kenya almost 3.0 per cent and Uganda close to 3.5 per cent. Rwanda tops the EAC list with almost 4.0 per cent.
Tanzania Mortgage Refinance Company (TMRC), Chief Executive Officer (CEO) Mr Oscar Mgaya said the low penetration was mainly caused by low awareness as most people think building a house using own-pocket are saving.
“This is expensive undertaking since one pays rent at the same time building a house. “The best practice is to take a mortgage loan and buy a house and use the rent for repaying the loan,” Mr Mgaya said. He said in most cases unaware of mortgage left would-be-home owner spend a large sum unknowingly.
TMRC data showed that merely 4,209 people in Tanzania have taken mortgage loan. Mr Mgaya also said high interest rate makes a house built on loan to be unaffordable to many. The research made by Centre for Affordable Housing Finance in Africa that published Housing Finance in Africa yearbook 2017 showed that mortgage interest rates in EAC are around 14 per cent and 20 per cent last year.
Tanzania interest rate was about 18 per cent, Uganda 19 per cent, Burundi and Rwanda around 16 per cent and Kenya 14 per cent. To tackle the high interest rate TMRC yesterday issued a 12bn/-five-year bond to the public after Treasury bond rate in Tanzania plummeted to around five per cent.
“The low interest rate of government bond enables us to issue this bond as we will access the public fund at low interest ad lend at low margins also,” Mr Mgaya said. TMRC since inception some eight years ago envisaged to raise funds through capital markets but market high interests backpedal the efforts.
“It was envisioned from its inception that TMRC will source funds from the capital markets through bond issuance among other sources. “It was just a matter of time and now is the right time given the declining interest rates environment,” added Mgaya.
He also said long duration of obtaining a title deed was another challenge though there are some improvements. “This is another are need to be improve though things have started to improve in recently days,” Mr Mgaya said.