Low-cost housing in limbo amid high cost of building materials

National Housing Corporation (NHC), Watumishi Housing Investment (WHI) and pension funds are currently implementing projects in various areas, with public interest in low-cost homes said to be growing steadily.

However, the last few years have seen prices of important building materials such as cement, steel bars, paints, gypsum, gravel, aluminium, tiles and glass rise sharply.

The situation is associated with inflationary pressure caused by multiple factors, including global financial instability, which has pushed up prices of imported building materials such as steel, tiles and aluminium.

WHI chief executive Fred Msemwa said the firm was facing challenges in delivering affordable homes as prices of building materials have kept on rising in the past few years, making it difficult to build houses that were affordable to ordinary home buyers.

He cited as an example cement prices, which have jumped from between Sh12,000 and Sh14,000 per 50-kilogramme bag to between Sh17,000 and Sh20,000, depending on the location.

Prices of steel bars have also risen from around Sh1.8 million per tonne to Sh2.4 million during the same period.

“It is a tricky situation because we know the income profile of our customers,” Dr Msemwa said.

WHI builds houses whose prices range from Sh45 million to Sh87 million and the units are being snapped up, but that could soon change as prices of building materials soar.

“The challenge is how to align the incomes of our customers with rising house prices,” Dr Msemwa added.

He said WHI was using its own construction company to build houses in an attempt to reduce costs.

“We have also come up with more flexible payment schemes that align with the incomes of public servants.”

NHC public affairs and information manager Muungano Saguya said the cost of affordable houses was affected by various factors, including rising prices of construction materials, infrastructure, VAT and the cost of land.

He acknowledged the challenges posed by rising prices of building materials, but said NHC continues to build low-cost houses.

Mr Saguya added that NHC was currently studying various construction methods and models that would ensure that house prices do not spiral out of control.

“Last year, we went to Kenya to learn about a new construction method known as the ‘tunnel form’, which has been used in that country to build houses that are affordable, attractive and durable. We want to start educating the public that it is not a must, for example, that houses should be built using traditional cement bricks.”

Mr Saguya said NHC was also finalising discussions with manufacturers of construction materials, including iron sheets, tiles and cement, so that the firm could buy them in bulk under long-term agreements.

He thanked the government for removing VAT on the sale of houses whose prices do not exceed Sh50 million.

“We now urge the government to consider reducing some taxes on imported construction materials to address the price issue.”

The assistant director for housing and property development in the Ministry of Lands, Housing and Human Settlements Developments, Mr Awadhi Salim, said various strategies were in place to sustain the construction of affordable houses in Tanzania.

They include formulating guidelines that help people to minimise costs when building homes.

“The guidelines are available in Kiswahili and English and they advise members of the public on how to significantly reduce construction costs,” Mr Salim said.

He added that the ministry was also partnering with other institutions to provide mortgages at pocket-friendly interest rates.

Industry and Trade permanent secretary Hashil Abdallah said stakeholders should submit a formal request for a reduction of VAT on construction materials.

"We are always ready. They need to bring us their suggestions and we will check whether they are realistic and work on them swiftly. Her Excellency President Samia Suluhu Hassan wants to see a better life for all Tanzanians and we cannot be an obstacle," he said.

Experts offer views

Tanzania is estimated to have a shortage of 3.8 million houses, with demand increasing by 380,000 units annually, according to NHC.

Experts have urged the government to remove VAT on imported construction materials and developers to research on alternative bricks and enter into long-term contracts with suppliers.

A lecturer at Ardhi University, Dr Maulid Banyani, said developers and the government need to work together to address spiralling costs.

“There are developers who are compelled to import some materials because they are not readily available locally. The government should think about how it can help,” he said.

He added that the government should also formulate a housing policy that will give a clear definition of “affordable housing”.

An independent real estate expert, Dr Felician Komu, said it was unlikely that  prices of building materials would come down in the near future, adding that  innovators should come up with alternative ways of building affordable houses.

“Developers can start by using building materials that are made with simple materials to reduce overall costs. Using bricks made by developers themselves instead of buying them from suppliers can help,” he said.