Why Tanzania’s traditional shop-house investment is becoming costly mistake

But as Tanzania edges closer to a middle-income economy, analysts warn that this long-held investment tradition may no longer yield the expected returns.

They say that as incomes rise, shopping patterns change, with many people preferring supermarkets, grocery chains and shopping malls over neighbourhood kiosks, leaving small-scale shop units idle for years.

Some property owners have already begun converting their unused or unfinished shop units into rental rooms after failing to attract tenants or recoup construction costs.

Real estate experts are now advising prospective developers to seek professional guidance before undertaking construction projects, cautioning that building without proper market analysis often leads to long-term financial losses.

Building because neighbours have built

Real estate economist Mr Kato told The Citizen that many individuals construct commercial spaces simply because others around them have done so.

“Many people build simply because their neighbours have done so,” he said. “While imitation isn’t necessarily wrong, it’s important to assess whether the area has enough commercial activity to sustain your investment.”

He said one of the most common mistakes is rushing into construction without conducting feasibility studies to determine whether a location is more suitable for retail spaces, rental apartments or even event halls.

“Once people acquire a plot, they decide to build commercial or residential houses because others nearby have done the same,” he noted. “But they forget that everywhere in the world, a successful real estate project begins with a sound concept and not just a structure.”

Architects design buildings, not business plans

According to Mr Kato, many developers misunderstand the roles of professionals involved in construction.

“When you consult an architect, their job is to translate your vision into a structure. But they are not business strategists,” he said.

“A real estate economist, on the other hand, can advise on what type of development will make the most financial sense for a particular location.

For example, instead of building a wedding hall, it may be wiser to construct student hostels depending on local demand.”

He added that many people construct shop frames simply because they qualify for bank loans, without verifying whether tenants exist. As a result, such buildings often remain vacant for years.

A costly mistake for many property owners

In Mbezi Luis, property owner Latifa Mdoe learned this lesson the hard way. She built several shop rooms targeting a nearby college, expecting the institution to attract a large population and boost demand.

However, after standing empty for more than 12 years, she is now converting the unused spaces into rental apartments, an undertaking that requires additional investment.

“When I built these shop rooms, I believed the presence of the college would attract many residents, but things changed,” she said.

“My advice is this: don’t rush into construction. Start by researching what will give you a good return on investment; otherwise, it becomes a challenge.”

Middle-income shift could render small shops less viable

Despite multiple warnings from analysts and examples of unsuccessful investments, many residents continue to build shop units in the hope that tenants will eventually come.

But experts caution that Tanzania’s middle-income ambitions may reshape consumer behaviour.

As more people turn to supermarkets and malls for most of their shopping needs, the demand for numerous small shops in residential areas is expected to decline.

The trend, analysts say, underscores a larger message: real estate investment in a transforming economy requires more than hope and imitation — it requires informed planning, market understanding and professional advice.