The mortgage market in Tanzania registered a 1% growth in the value of mortgage loans as of 31st March 2021 compared to the previous quarter…
The Tanzania mortgage market registered an annual growth of 6% in the value of mortgage loans in 2020, reaching an outstanding mortgage debt of USD 202.71 million (TZ 464.14 billiob), compared to USD 190.74 million in 2019 and USD 183.67 million in 2018.
The average mortgage debt size was TZS 78.56 million equivalent to US$ 34,010, compared to USD 34,935 in 2019 and USD 36,763 in 2018.
The ratio of outstanding mortgage debt to Gross Domestic Product (GDP) increased to 0.30% compared to 0.36% in 2019.
Tanzania Mortgage Lenders
The number of mortgage lenders increased from 32 in 2018 to 34 in 2019 following the entrance of Ecobank Tanzania and the Tanzania Postal Bank during the year. At the end of March 2021, the number of mortgage lenders stayed unchanged.
The mortgage market was dominated by five top lenders, who commanded 68% of the market. CRDB Bank commanded 39.65% of the mortgage market share, followed by Stanbic Bank (11.12%), Azania Bank (6.24%), NMB Bank (5.69%), and NCBA (5.64%).
The typical interest rates offered by mortgage lenders ranged between an average of 15 – 19%, compared to 22% and 24% in 2010.
Tanzania Mortgage Demand and Constraints to Growth
The Tanzanian housing sector’s fast-growing demand is mainly driven by the strong and sustained economic growth with GDP growth averaging 6-7% 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.
However, high interest rates and lack of affordable housing remain the major constraints on the Tanzanian mortgage market growth despite the high demand for housing and housing loans.
Most lenders offer loans for home purchase and equity release while a few offer loans for self-construction which for the most part continue to be expensive beyond the reach of the average Tanzanians.
An estimated 3.1 million urban households (75%) earn less than USD 1,000 per month, implying that they require affordable housing solutions costing below USD 19,300.
Furthermore, of these 3.1 million households, 1.7 million urban households (40%) could only afford products costing USD 9,600.
Currently, most of Tanzania’s mortgages are for products costing above USD 40,000 which means that unless housing finance is made much more widely available in the future, 93% of all urban households are excluded from mortgaged housing.
Additionally, cumbersome processes around the issuance of titles (especially unit titles) continue to pose a challenge by affecting borrowers’ eligibility to access mortgage loans.
Expansion of Mortgage Finance in Tanzania
A key element in the growth of the mortgage market in Tanzania is the provision of long-term funding both in the forms of refinancing and pre-financing.
This role is fulfilled by the Tanzania Mortgage Refinance Company (TMRC), a financial institution co-founded by the Tanzanian Government and the World Bank in 2010 to support member banks to extend long-term mortgage loans to the public through the provision of long-term funds.
Initially, TMRC was established as a member-based institution not lending to non-members. In July 2016, TMRC opened up lending to non-member banks as part of its strategy to expand its customer base and effectively fulfill its role of being a catalyst to mortgage lending in the country.
TMRC has already extended loans worth TZS 134.7 billion (USD 58.31 million) to 16 primary mortgage lenders (PMLs).
As of 31st December 2020, refinancing and pre-financing mortgage loans advanced by TMRC to PMLs were equivalent to 29% of the total outstanding mortgage debt.
A significant opportunity therefore still exists for TMRC to refinance the remaining 71% of the mortgage market portfolio.
Last Updated: 30th July 2021
Sources: Bank of Tanzania (BoT), Centre for Affordable Housing Finance in Africa (CAHF), Tanzania Mortgage Refinance Company (TMRC)
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