BY DIRAMAKINI
THE mortgage market in Tanzania registered a 2.54 percent growth in the value of mortgage loans as of 30 September 2022 as compared to the 1.24 percent growth recorded in the previous quarter.
On a year-to-year comparison, 7.01% growth was registered in value of mortgage loans as of 30 September 2022.
This was indicated in the Tanzania Mortgage Market Update September 30th, 2022 recently released by the Bank of Tanzania (BoT) and the Tanzania Mortgage Refinance Company (TMRC).
"There was no new entrant into the mortgage market during the quarter. The number of banks reporting to have mortgage portfolios declined to 32 banks as of 30 September 2022 compared to 33 banks reported in the previous quarter following acquisition of First National Bank Tanzania Limited by Exim Bank Tanzania Limited.
"Outstanding mortgage debt as of 30 September 2022 increased to TZS 522.95 billion1 equivalent to US$ 225.46 million as compared to TZS 509.99 billion2 equivalent to US$ 220.23 million reported on 30 June 2022.
"Average mortgage debt size as at was TZS 87.27 million equivalent to US$ 37,628 marking a slight increase from TZS 82.56 million equivalent to US$ 35,654 reported on previous quarter".
The ratio of outstanding mortgage debt to Gross Domestic Product (GDP) increased to 0.30 percent compared to 0.29 percent recorded in the previous quarter.
The update explains that, the Mortgage debt advanced by the top 5 Primary Mortgage Lenders (PMLs) accounted for 64 percent of the total outstanding mortgage debt.
"Typical interest rates offered by mortgage lenders ranged between averages of 15 - 19 percent. The Tanzanian housing sector’s fast-growing demand is mainly driven by the strong and sustained economic growth with GDP growth averaging 6 -7 percent over the past decade, the fast-growing Tanzanian population, which is estimated to more than double by 2050, and efforts by the Government in partnership with global non-profit institutions and foreign Governments to meet the growing demand of affordable housing.
"Domestic credit, consisting of credit extended by the banking system to the private sector and central government, grew at an annual rate of 27.3 percent in August 2022, compared with 8.7 percent in August 2021. Private sector credit also maintained an upward trend, recording an annual growth of 20.7 percent from 3.2 percent in August 2021.
"The sustained strong growth in private sector credit is explained by recovery of private sector activities from the effects of COVID-19, improved business environment in the country, and supportive fiscal and monetary policy conditions," the update explains.
The Tanzanian housing demand (which is estimated at 200,000 houses annually and a total housing shortage of 3 million houses as per the NHC report) has been boosted by easy access to mortgages, with the number of mortgage lenders in the market increasing from 3 in 2009 to 32 by 30 September 2022 and the average mortgage interest rate falling from 22 percent to 15 percent.
"Efforts to develop housing projects by developers continue with a special focus on Dodoma Capital City as the Government has relocated its administrative functions to Dodoma. High-interest rates and lack of affordable housing remain the prime constraints on mortgage market growth.
"Tanzania Mortgage Refinance Company Ltd (TMRC) continues to play its primary role in extending refinancing and pre-financing facilities to Primary Mortgage Lenders (PMLs)".
Mortgage Market Growth
The mortgage market in Tanzania registered a 2.54 percent growth in the value of mortgage loans as of 30 September 2022.
Total mortgage debt outstanding that resulted from lending by the banking sector for the purposes of residential housing was TZS 522.95 billion equivalent to US$ 225.46 million.
Figure below shows the trend of mortgage debt from lending activities in terms of amounts over the years:
Increasing Competition in the Mortgage MarketAs of 30 September 2022, 32 different banking institutions were offering mortgage loans. The mortgage market was dominated by five top lenders, who commanded 64 percent of the market.
CRDB Bank Plc was a market leader commanding 37.07% of the mortgage market share, followed by Stanbic Bank (8.11%), Azania Bank (7.34%), NMB Bank Plc. (7.25%) and Exim Bank (4.50%).
Figure below shows the market share for the top five mortgage lenders as of 30 September 2022 in terms of outstanding mortgage debt;
While interests on mortgage loans improved from 22-24 percent in 2010 to 15-19 percent offered today, market interest rates are still relatively high hence negatively affecting affordability.
Additionally, cumbersome processes around the issuance of titles (especially unit titles) continue to pose a challenge by affecting borrowers’ eligibility to access mortgage loans.
Further, competition in the market has led to emergence of other products that are impacting mortgage market growth as the products have favorable terms than mortgage product and are used for housing purposes.
These products are competing with mortgage in terms of loan amount and to some extent tenor as they are offering consumer loans for the tenor of up to seven years amounting to around TZS 120 million, an amount enough to buy a housing unit.
TMRC Supporting Market Growth through Provision of longer-Term Funds to Members
A key element in the growth of the mortgage market in Tanzania continues to be the provision of long-term funding both in the forms of refinancing and pre-financing by the TMRC to facilitate PMLs matching their assets (mortgage) and liabilities (funding).
TMRC was established in 2010 under the Housing Finance Project (HFP) which was set up by the Ministry of Finance and Planning in collaboration with the World Bank and the Bank of Tanzania in alignment with Tanzania’s five-year National Strategy for Growth and Poverty Reduction (MKUKUTA) and the Tanzania Development Vision 2025, which highlight the importance of affordable housing, access to finance, and capital market development.
Figure below shows the overall contribution of TMRC to the mortgage market over the years. TMRC Refinancing Share of the Mortgage Market
As of 30 September 2022, TMRC had extended loans worth TZS 145.20 billion (US$ 62.60 million) to fifteen (15) primary mortgage lenders through Refinancing and pre-financing mortgage loans.
The loans advanced by TMRC to PMLs were equivalent to 28 percent of the total outstanding mortgage debt hence a significant opportunity exists for TMRC to continue refinancing the remaining 72 percent of the mortgage market portfolio.
In the twelve years that TMRC has been operational, a significant impact has been noted in the mortgage market. The number of banks offering mortgage loans has grown from only 3 banks in 2010 to 32 by 30 September 2022, mortgage repayment period has increased from the maximum of 5-7 years that was previously offered to 25 years that banks offer now with mortgage interest rates declining from 22-24 percent offered in 2010 to 15-19 percent being offered now.
Another initiative set up under the Housing Finance Project (HFP) was the Housing Microfinance Fund (HMFF) which was geared toward providing long-term loans for lower-income earners who currently lack access to housing finance either for the construction of a home or for home improvements.
The Fund officially began its operations in 2015 and on 31 July 2015, the first disbursement of TZS 1 billion was made under the fund to DCB Commercial Bank Plc with the total credit line to the bank being TZS 3 billion).
This marked the first step towards significant progress in the microfinance sector including subsequent disbursements by HMFF. HMFF is currently operated by the Bank of Tanzania.
Awareness Programs by TMRC to impact mortgage market target group
Various mortgage awareness programmes have been established including TMRC social media pages in Facebook, Instagram, Twitter and Linked-in to provide mortgage product information to the public and stakeholders.
Awareness campaigns are conducted by TMRC in collaboration with National Housing Corporation and Primary Mortgage Lenders through TV program sessions and stakeholders’ workshops to further increase information outreach and public understanding of mortgage product and benefits embedded on the product.
The awareness also is targeted to address some of market growth impediments including supply, unit titles issuance and awareness hence market growth.
Other ongoing initiatives by TMRC in mortgage market growth
The mortgage market in Tanzania has not fully catered the country’s population from accessing housing finance to improve their housing opportunities, microfinance segment being under-privileged due to lower level of income, lack of access to formal financial system and informal housing.
In support of mortgage market growth to microfinance sector, TMRC in collaboration with Habitat for Humanity International is setting up an initiative to extend mortgage loans outreach to microfinance sector.
The two institutions have signed a Memorandum of Understanding as a first step in the organizations’ joint effort to expand and strengthen the low-income housing finance sector in Tanzania.
The initiative is at research phase and its implementation will provide a tailor-made infrastructure to reach this economic segment to include them in decent and affordable homes.
Total Mortgage Debt Outstanding by Lenders as of 30 September 2022
