By Guardian Reporter , The Guardian
TANZANIA’S residential real estate market is on track to achieve significant milestones in 2024, with projections indicating a value of US$0.59 trillion.
According to data available at Statista, the sector is anticipated to exhibit a robust annual growth rate, with a compound annual growth rate of 4.74 percent from 2024 to 2028, culminating in a market volume of US$0.71 trillion by 2028.
In comparison to global counterparts, China is anticipated to lead the real estate market, projected to generate a staggering value of US$117.40 trillion in 2024.
While Tanzania's figures may seem comparatively modest, the trajectory reflects promising growth and investment opportunities within the country's residential real estate landscape.
Speaking exclusively to this journalist, Dr Jummane Mchome was of the view that the burgeoning demand for residential properties in the country, can be attributed to several factors.
For him, the first thing is the nation's economy saying: “The economy is experiencing a steady expansion, bolstered by robust macroeconomic policies and strategic investments in infrastructure and development projects.”
He adds: “This economic growth has spurred an increase in disposable income levels, thereby driving demand for housing and real estate investment opportunities.”
He further mentioned about the country’s urbanization, affirming that it is reshaping the country’s demographic landscape, with a significant portion of the population migrating from rural to urban areas in search of employment, education, and improved living standards.
“As urban centers continue to burgeon, the need for affordable, high-quality residential accommodations becomes paramount, propelling the residential real estate market forward,” Dr Mchome clarified.
On the other hand, a civil engineering student Mary Ibrahim, believes that government initiatives which aimed at promoting affordable housing and enhancing access to mortgage financing have also played a pivotal role in stimulating demand within the residential real estate sector.
“Policies such as tax incentives for real estate developers, streamlined regulatory processes, and public-private partnerships have facilitated the construction of housing units and catalyzed investment in the market,” she expounded.
Moreover, she also believes that the influx of foreign direct investment (FDI) into Tanzania's real estate sector has injected additional capital and expertise, further fueling growth and innovation within the industry.
“International developers and investors recognize the untapped potential of Tanzania's real estate market and are actively seeking opportunities to capitalize on emerging trends and consumer preferences,” she explained.
For his party, Martin Mgwema, a real estate intrapreneur, said: “In response to evolving market dynamics, real estate developers are diversifying their offerings to cater to varying consumer needs and preferences.”
He adds: “From affordable housing projects targeting middle and low-income segments to luxury developments catering to high-net-worth individuals, the market is witnessing a proliferation of residential options tailored to diverse demographics.”
However, despite the optimistic outlook, the residential real estate market in Tanzania faces inherent challenges and risks.
“These include regulatory uncertainties, land tenure issues, inadequate infrastructure, and access to affordable financing. Addressing these impediments will be crucial in sustaining the momentum of growth and ensuring the long-term viability of the market,” noted Mgwema.
On the other hand, in his recent article on real estate, Sunday Ndamugoba a legal expert, said that given the relative infancy of the real estate market in Tanzania, a more significant challenge is the lack of trading information or data on real estate developments in Africa, which makes it difficult to set rentals.
For him, rentals are currently perceived as being very high and therefore lucrative for investors as demand outstrips supply, but some concern remains regarding the sustainability of such high rentals; and as more and more developments are rolled out in the continent, so the rentals will reduce.
“Well, moreover the ability to attract high quality tenants in the retail space is a challenge, resulting in a relatively poor depth of retailers. There are many buildings that were erected for example in Arusha that are not occupied to date because of the “per square metre” rent payment. This will, maybe, improve in the near future as tenants start to appreciate newer systems of payment,” He said.
Ndamugoba explained in his article dubbed: Tanzania Real Estate development: A “boom” or a “time bomb” saying: “Although the demand for quality housing remains high, the expectation of subdued growth in both the Tanzanian economy and household disposable income may dampen house price progression.”
He adds: “Meanwhile, banks still have to work out a significant volume of defaulted loans and sell the related properties on the market and the prospect of a gradual rise in interest rates by the end of 2015. This adds to the uncertainty on future gains in house prices.”
Ndamugoba believes that more is needed to facilitate home ownership both as a fundamental right and as a stimulus to the broader economy. There should be broad tax incentives for home buyers, greater clarity on interest rates and improved investment incentives for developers as has been done in overseas markets.
He cited house price affordability is the key in England, while in Tanzania lavish and deepness of your pocket is the key. Various incentives mean that more people with average earnings should be able to afford to buy their first house and the house price-to-earnings ratio should be lower as to make it easier to get on the property ladder.
Africa is growing fast, and more investments particularly in real estate are bound to come and change the motherland. There is also a growing recognition of the need for domestic finance to play a more significant role in real estate development, with rent being paid by tenants in local currencies.
“To protect the real estate industry there should also be curbing on corruption, should it be present no, or in the future, I don’t know but I fear it will cripple the industry,” he noted.
Adding: “Even more so, DFIs require recipients of development finance to implement and maintain good environment, social and governance principles, as well as to comply with international anti-bribery legislation, such as the UK Bribery Act and the Foreign Corrupt Practices Act of the US, which have extra-territorial reach.”
The legal expart was of the view that the creation of such high value “stock” in the real estate market, in turn, creates a healthy secondary exit market. This makes it easier for UK and US investors to sell their developments, whether it is a retail mall, office block or hotel, and offers a sophisticated platform for investors to invest in.
Therefore, with strategic investments, proactive policy interventions, and collaborative efforts between stakeholders, the sector holds immense potential to contribute significantly to the nation's economic development and societal well-being, the country’s residential real estate market is poised for substantial growth.
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