Tanzania’s fledgling mortgage market registered steady growth in 2013 as the pace of housing investment picked and new lenders came on board to intensify competition in the traditional banking products, according to a new report by the Bank of Tanzania.
“Compared to other countries in the region, Tanzania still has a relatively smaller mortgage market, although it is growing rapidly,” the central bank said in its 2013 Mortgage Market Update, released here Friday.
At the end of the year, total lending by banking sector for the purposes of residential housing was Tanzania Shillings 156.50 billion (US$96.8 million), representing an annual growth of 46 percent,
“Total number of mortgage loans also grew rapidly, from 1,889 at the beginning of 2013 to 2,784 by end of December 2013, being an increase of 47 percent,” the bank reported.
It pointed out that factors that led to the increase included a favorable interest rate environment during the year, increased awareness on mortgage loans among borrowers, public awareness campaign by major banks and the launch of mortgage loan products by CRDB Bank Plc and Exim Bank among other finance houses.
The bank, however, observed that high interest rates and lack of affordable housing remain the major constraints on market growth in Tanzania.
Though 19 banking institutions offered mortgage loans, the market was dominated by three top lenders – Azania Bank Limited, Stanbic Bank (Tanzania) Limited and Commercial Bank of Africa (Tanzania) Limited – which among themselves commanded about 67 percent of the mortgage market.
Azania Bank, which has the longest presence in the mortgage market, is a market leader dominating 24 percent of market share, closely followed by Stanbic Bank with about 21 percent of the mortgage market share.
“A key element in the growth of the mortgage market,” the report explained, “has been the provision of long term funding both in the form of refinancing and pre-financing by the Tanzania Mortgage Refinance Company (TMRC).”
Mortgage debt advanced by TMRC to mortgage lenders accounted for 11 percent of the market’s total outstanding mortgage debt.
Compared to neighbouring countries in the East African region, Tanzania still has a relatively smaller mortgage market.
As a proportion of Tanzanian GDP, outstanding mortgage debt was equivalent to around 0.36 percent, which the central bank said was lower than that of Kenya, Uganda and Rwanda.
On the market’s future, the report said the “demand for housing and housing loans remains extremely high but is constrained by inadequate supply of affordable housing and high interest rates.”
The bank has warned in the report that the recent rise in the Treasury Bills rate to 15 percent (those with a maturity of 182 days) would have a negative impact on affordability of all forms of long term debt, including mortgages.
Typical interest rates offered by lenders varied between 18 per cent and 21 per cent while the absence of affordable housing was another factor that impeded growth of the mortgage market.
“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,” the report said.