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Tanzania Mortgage Market Rises 4.56% in Q1 2024, 11.38% Year-Over-Year

Tanzania Mortgage Debt Outstanding Q1 2024

In the first quarter of 2024, the mortgage market in Tanzania registered a 4.56% growth in the value of mortgages provided by the banking sector for the purposes of residential housing compared to the last quarter of 2023.

The value in residential mortgages went from TZS 587.24 billion recorded on 31 December 2023 to TZS 614.57 billion (US$ 236.36 million) on 31 March 2024.

This was indicated in the Tanzania Mortgage Market Update – 31 March 2024 recently released by the Bank of Tanzania (BOT).

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On a year-to-year comparison, 11.38% growth was registered in the value of mortgage loans as of 31 March 2024.

Tanzania Mortgage Market Demand and Supply in Q1 2024

Demand for housing and housing loans remains extremely high as it is constrained by an inadequate supply of equitable houses and high interest rates charged on housing loans.

The Tanzanian housing sector’s fast-growing demand is mainly driven by strong and sustained economic growth with GDP growth averaging 6.2% 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 for affordable housing.

The Tanzanian housing demand is estimated at 200,000 houses annually and the total housing shortage stands at 3 million houses.

The demand has been boosted by easy access mortgages, with the number of mortgage lenders in the market increasing from 3 in 2009 to 31 currently, and the average mortgage interest rate falling from 22% to 15%.

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Most lenders offer loans for home purchase and equity release while a few offer loans for self-construction which continue to be expensive and beyond the reach of the average Tanzanians.

There was no new entrant into the list of suppliers in the mortgage market during Q1 2024. The number of banks reporting to have mortgage portfolios remained at 31 banks as of 31 March 2024.

The mortgage market was dominated by five top lenders, who commanded 63% of the market. CRDB Bank Plc was a market leader commanding 33.63% of the mortgage market share, followed by NMB Bank (9.65%), Azania Bank. (8.13%), Stanbic Bank (6.89%), and KCB Bank (4.94%).

Interest rates on residential mortgages stayed at 15-19%, which is 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 residential mortgages.

However, competition in the market has led to the emergence of other products that are impacting mortgage market growth as the products have favorable terms than mortgage products and are used for housing purposes. These products are competing with mortgages 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.

The competition comes from the ease with which competing products, specifically, consumer loans are available relatively easily compared to the lengthy process experienced in mortgage loans as well as additional costs in mortgage loans including registration and valuation fees as well as insurance costs that are not applicable in consumer loans.

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