News Column

Bright Prospects Seen in Housing Loans

February 17, 2014

INADEQUATE supply of affordable houses and high interest rates have been compounding the ever rising demand for houses and housing loans.

The fourth quarter mortgage market analysis released by the Bank of Tanzania (BoT) attribute the recent hike of yields in the treasury bills to over 15 per cent to have negatively impacted on affordability of all forms of long term loans, including mortgages.

The analysis stated that the typical interest rates offered by lenders range between 18 per cent and 21 per cent.

"Most lenders offer loans for home purchase but increasingly different products are emerging such as loans for self-construction and for equity withdrawal, which continue to be expensive and beyond the reach of the average Tanzanian," stated the report.

Despite the hurdles, the mortgage market has been growing steadily as the pace of housing investment continues to pick up. For example, the year ended December saw the total lending by the banking sector for the purposes of residential housing going up to 156.5bn/-, equivalent to 46 per cent growth.

Similarly, the total number of mortgage loans grew 2,784 at the end of the year compared to 1,889 at the beginning of 2013, an increase of 47 per cent.

Factors attributed to this increase include favourable interest rate environment during the year and increased awareness on mortgage loans among borrowers.

Also, the public awareness campaign carried by major banks as well as the launch of mortgage loan product by CRDB Bank, Exim Bank and other Tanzania Mortgage Refinance Company Limited (TMRC) member banks that had no such a product.

In the period, 19 different banking institutions were offering mortgage loans, with the number expected to increase even further as more lenders continue to launch mortgage loan products.

The mortgage market was dominated by three top lenders, who amongst themselves command about 67 per cent of the mortgage market.

Azania Bank, with longest presence in the mortgage market, was a market leader commanding 24 per cent of market share, closely followed by Stanbic Bank with about 21 per cent.

The market experienced new entrants and there are prospects that large banking institutions such as NBC and NMB will enter the mortgage market as competition in the traditional banking products continue to intensify.

Also, the construction of new houses by the National Housing Corporation (NHC) over the next three years will have a positive effect on the mortgage market as most of these will likely be priced at affordable levels.

Likewise new measures such as the Civil Servants Housing Scheme which is expected to build 50,000 affordable houses in the next five years have the potential to boost the mortgage market even further.

Most Pensions funds are also actively engaged in advancing mortgage loans to their members, something which will further boost the market in Tanzania.

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Source: AllAfrica

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