Bank ventures into lucrative, ready-made housing market

Tanzania faces a serious home shortage, with demand hovering over three million units whereas supply is a mere 0.5 per cent of the total demand per year.

Managing Director of CRDB Bank, Dr Charles Kimei

Managing Director of CRDB Bank, Dr Charles Kimei

Studies show that house demand is averagely increasing at a rate of 200,000 units, far above the 15,000 houses put up annually and the gap is likely to worsen if immediate remedial measures are not taken.

In a recent report, a UK-based Global Property Guide (GPG)—a research firm that sells data to investors in residential property— said Tanzanians who yearn for home ownership could realise their dreams if they were ready to pay 134 times of their annual incomes.

The GPG report fits well with CRDB Bank estimates that currently, individuals take up to 10 years to put up a simple family house due to regulations associated with what it takes to get a mortgage. The Bank’s Managing Director, Dr Charles Kimei, says with Jijenge, a new house loan scheme, the bank gives potential home owners a peace of mind when it comes to construct and own a house.

“Everyone likes to be called a landlord and an opportune time has come to be called so through Jijenge initiative,” Dr Kimei says. CRDB’s Jijenge offers up to 500m/- mortgage finance that is repaid within a period of up to 20 years unlike the bank’s previous house loan schemes that could only be repaid in a period not exceeding five years.

“The previous mortgage scheme was troublesome for borrowers, the repayment period was too short,” Dr Kimei says, “If a client asked for a ten year loan, we had to look at him twice thinking that they might die before paying our loan.”

But, given the problem of owning decent home and the time it takes individuals to build houses, the bank went back to the drawing table and came up with a better package—Jijenge initiative. After analysing the potential of Jijenge scheme that anticipates changing the entire real estate in the land, CRDB focused on mortgage business, offering loans of up to 500m/-, repayable in 20 years.

The Jijenge House Loan Scheme offers solutions to challenges facing Tanzanians in building their residential houses for either constructing or purchasing a home. It also offers a renovation loans. The good side of Jijenge is the interest rate charged.

The longer period for loan repayment period of 20 years spread payback amount to small amount, reducing the interest rate. The interest rate for Jijenge is 18 per cent plus one per cent insurance cover for the loan. The cover, according to experts, takes care of the loan in case of death or injuries that can put the borrower out of job.

The scheme focuses to borrowers ranging from workers, entrepreneurs, farmers and fishermen. Official data put real estate business at over 500bn/- in Dar es Salaam alone but still houses demand is high and is increasing fast. “This means that if we don’t take effective action today, the situation will worsen tomorrow,” Dr Kimei cautions.

According to National Housing Corporation (NHC) Director of Regional Operations and Administration Raymond Mndolwa, the loan repayment period of 20 years is flexible and attractive to potential borrowers. “If NHC, the main market player, throws its full weight on real mortgage business, we are sure to see others following suit.

NHC cannot build new homes unless having sufficient money,” says Mr Mndolwa. NHC in this financial year plans to build 3,000 house units across the country, half of them in major cities. CRDB’s Mortgage Business Manager Silas Katemi says mortgage business for home loans in Dar es Salaam alone is estimated at over 500bn/- at the moment and increasing at a fast-pace.

“Apart from ordinary Tanzanians spending ten good years to construct a house, they also use their personal savings on immovable asset,” Mr Katemi says, adding that under Jijenge, things are expected to change drastically. To access the loan, the bank accepts only recognised land documents from the main and local governments—title deeds, offer certificates for surveyed plot and village letter of offers.

“We will not issue a loan to squatter developer because we want to beautify our cities and towns…we cannot go back and develop unsurveyed areas,” says CRDB Director for Marketing, Research and Customer Services Tully Esther Mwambapa. The procedures of getting the loan through Jijenge for workers include proof of basic monthly salary of not less than 200,000/- and 80 per cent of total house cost, as specified at Tanzania Mortgage Regulation Act of 2011.

By ABDUEL ELINAZA, Tanzania Daily News

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