Housing industry: Chances, challenges and its future

Recently, Watumishi Housing changed its name from company to investment fund to reflect the scope of its mandate in the housing industry. In this interview, The Citizen’s Gadiosa Lamtey discussed different issues around the sector with Dr Fred Msemwa, the chief executive officer of the Watumishi Housing Investment (WHI) who explained the challenges and opportunities in the industry and what is needed for the contribution of the industry to have an impact on the economy.

The WHI recently changed from being a company to become an investment manager. What should people expect from this move?

 The previous name had some limitations as it tended to limit the scope to housing which is not actually the only mandate the company has. While the internal re-organisation may not change, the general public sees the change of name as a strategic shift in terms of scope and breadth of our activities.

The general public should expect WHI to take a more active role in the financial markets space than previously was and this is likely to add a lot of value to Watumishi Housing Investments existing as well as prospective clients. To serve as an empowerment vehicle now not only to employees in the public and private sector but the rest of Tanzanians who want to build their wealth by optimising on opportunities existing in the financial markets be it short term or long term investments. This helps in introducing the new financial scheme known as Faida Fund which will soon be launched.

Briefly, please enlighten us on the progress of WHI in housing development?

WHI was established in 2014, at that time it was difficult for an average employee to acquire a decent home using salary as prices of houses available in the market were far higher than the monthly income. Impliedly, the first task was not actually to build houses but to design a system that would make it possible for employees who have been locked out of the housing market to buy decent homes using their existing salaries.

The second task was to look for land starting in at least 14 regions to commence construction of 1,000 affordable homes. The third task was to start the actual construction and to manage the process all the way to selling houses to target customers. So far have built 943 homes across 19 regions in Tanzania. Furthermore have managed to put in place a system that has enabled employees in the public and private sectors to acquire decent homes.

So far WHI has invested Sh57 billion in the form of Unit (or shares) worth Sh250 each. These units have since grown to Sh317 billion making the fund size to be Sh71 billion.

What are the main challenges facing real estate in Tanzania?

There are several challenges facing the real estate sector in Tanzania but the key ones centre around availability of serviced land to allow smooth project development where developers are forced to undertake Greenfield development hence being obliged to provide for basic infrastructure such as roads, electricity and water which could more efficiently be made by responsible agencies.

Furthermore, Value Added Tax (VAT) remains a stumbling block for provision of affordable homes as it tends to increase prices of homes by at least 18 percent.

This is a significant amount considering the income level of most prospective homebuyers. In connection with that, the availability of construction finance could help in increasing the delivery of construction projects which is not the case at the moment.

With your experience in the industry, what can be done to accelerate its contribution to the economy?

Housing plays a key role in the economy and is sometimes said to be an indicator of the level of civilisation of a nation. In recent years, we have given more priority to surveying land to produce plots for sale and therefore not being able to complete the whole housing cycle to the detriment of our own development. While surveying and selling of plots can enable municipalities and districts to attain short term revenue targets, encompassing housing in the cycle guarantees new and permanent sources of income such as property taxes.

Furthermore, there is a very close relationship between housing and industrial development as the former provides a market of products produced by the latter for example, products such as cement, steel, timber, tiles, iron sheets produced by our industries are quickly absorbed by the housing sub’-sector.

There is also economic evidence that states that a well-developed housing sector can help in making the industries more competitive by lowering the production costs e.g as houses and accommodations become more available, the amount paid by employers as rent to their employees may be lowered hence lowering products production costs.

Where do you see the housing industry in the next five years?

Looking five years ahead, see a brighter future for the housing sub’-sector. This is evidenced by a number of inquiries we have been receiving since the commencement of the 6th phase government. Prices of land, rental rates have started to improve and the pace of public residential construction activities is also picking up. Despite this positive development, there is still a need for the authority responsible to continue improving the business environment to support the sector to grow even faster. Such measures range from reviewing the zoning requirements for some areas to allow more vertical growth to conserve land and save in infrastructure outlays. Reducing the number of days in securing necessary permits and approvals will not only speed the flow of work but also cut project costs that can translate into affordable house prices to final buyers.

How did the government relocation to Dodoma affect you as a developer?

As far as WHI is concerned, the government relocation to Dodoma has turned out to be more of an opportunity than a challenge. While all houses left behind by buyers who relocated to Dodoma have been sold or rented out, the WHI found a fresh and an even bigger market for its houses in Dodoma. For the past three years we have been much occupied with building new houses in Dodoma to bridge a record housing gap caused by a bigger number of civil servants who were transferred to Dodoma.

Currently, the demand seems to be stabilizing and set for a Dar es Salaam comeback that will see new projects being launched here to continue to manage demand for houses for Dodoma and other regions as well.

Do you think the housing development is competitive enough in the country?

Developers in Tanzania are trying their best to deliver projects more efficiently than many other countries, thanks to the availability of most common building materials such as cement, paints and steel within the country. If you take an example of the housing sub’-sector, affordable houses built and sold in Tanzania are of the best quality and yet most affordable when compared to other houses built in Africa.