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Bank of Tanzania gets $40m to ease housing shortage

The Bank of Tanzania (BoT) has secured a $40m (Sh52.8bn) loan from the World Bank for the establishment of a Housing Finance Project (HFP) to help ease the housing shortage, especially in the urban centres.

The government’s initiative is rooted in the belief that enabling access to housing finance will help improve affordability and building standards, and also encourage the private sector to play a greater role in the provision of housing.

The project, according to the BoT, includes the development of mortgage and housing-microfinance instruments in an effort to cater for different categories of would-be homeowners.

The Resettlement Policy Framework (RFP), which was posted on the BoT’s website, indicates that the loan has been secured through the International Development Association (IDA) credit.

According to the BoT, the main objective of the project is to expand access to affordable housing finance for the purchase, construction or upgrading of residential houses.

The objective will be achieved through the creation of a mortgage liquidity facility (direct funding) amounting to $30m (Sh36.9bn), to be managed initially by the BoT, and later by the Tanzania Mortgage Refinance Company (TMRC).

The loan will also be used to set up a Housing Micro-Finance Fund (HMFF), with an initial capital of $3m (Sh3.9bn).
The remaining $7m (Sh9.2bn) will finance a programme of technical assistance and capacity building, which will address issues in the supply of housing, the mortgage market and housing micro-finance.

“TMRC will provide housing finance mortgage loans to financial institutions, while HMFF will provide housing microfinance loans to credit institutions – in both cases for providing housing loans to developers/investors in the house construction sector,” notes BoT, in its online document.

HFP will be implemented through a number of government agencies, financial institutions and private developers, all coordinated by and accountable to BOT. Even as the current impetus in the home financing initiative comes from both the private sector and the government, long term financing for housing remains scarce at present, in part because lenders do not have access to reliable sources of long term financing.

But experts in the field argue that improving access to housing finance will help improve affordability and construction standards, and encourage the private sector to take a greater role in the provision of housing.

Tanzania, like other African countries, suffers from a severe shortage of good quality housing, which has been growing every year.
It is compounded by the lack of long-term housing finance, the absence of a formal residential housing construction sector, difficulties with land rights and rapid population growth and urbanisation.

The passing of the Mortgage Finance (Special Provisions) Act, 2008 has created a lot of momentum in government for the development of housing finance, and hence the current efforts to establish the HFP.

In addition, the enactment of Unit Titles Act, No 17 of 2008, has significantly improved the prospects for mass housing construction and the demand for mortgages.

The BoT had engaged two consultants, Ms Saada Juma and Mr Bashiru Abdul, to draw up the Resettlement Policy Framework, which will be used as one of guidelines in the rollout of mortgage its financing schemes.


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