Tanzania’s construction sector set to hit Sh40 trillion amid affordability concerns

According to a Q1 2026 Tanzania Construction Industry Databook compiled by industry analysts and distributed by ResearchAndMarkets.com, the industry will maintain steady momentum over the medium term, growing at an annual average rate of 6.7 percent through 2030.

This follows a period of robust expansion between 2021 and 2025, when the sector recorded a compound annual growth rate (CAGR) of 10.1 percent, supported by large-scale infrastructure projects and increased private sector participation.

Analysts say the continued growth reflects Tanzania’s broader economic trajectory, with consistent GDP expansion, population growth and rising demand for residential, commercial and industrial spaces.

Hello Africa Consults managing partner Emmanuel Njavike said the surge in construction activity is largely being fuelled by heightened investor confidence in real estate, which is increasingly viewed as a stable and profitable long-term investment.

 “Demand has increased significantly, particularly in real estate. Investors are responding to the growth in economic activities and the expanding urban population, which continues to create demand for housing and commercial properties,” he said.

Mr Njavike noted that while the sector is thriving from an investment perspective, the benefits are not evenly distributed across society.

 “The real estate business is doing well, but the housing market is not inclusive. There are many groups—students, young graduates, low-income earners—who are unable to access affordable housing, especially in major cities like Dar es Salaam.”

According to Mr Njavike, the core challenge lies in the cost structure of property development, where high land prices and expensive construction materials directly translate into higher rents and sale prices.

 “If an investor incurs high costs in acquiring land and building, those costs are inevitably passed on to tenants or buyers. That is why affordability remains a major issue,” he explained.

Industry players say the pricing trends are consistent with market fundamentals, but acknowledge that they limit access for a significant portion of the population.

Ms Reginald Peter, a relocation agent with Expat Connect Tanzania, said rental prices are influenced by factors such as location, quality and demand, with newer developments often commanding premium rates.  “Prices are generally reasonable in relation to the market, but new houses tend to have higher rents because investors are looking at returns. This makes it difficult for lower-income groups to keep up,” she said.

Data from the Tanzania Mortgage Refinance Company (TMRC) shows that the mortgage market is also expanding, with the value of residential mortgages increasing by 3.8 percent to Sh720.81 billion as of September 2025.

The growth reflects rising demand for home ownership, supported by steady economic performance, which has averaged 5.8 percent over the past decade, as well as a fast-growing population expected to more than double by 2050.

At the same time, government investment continues to play a critical role in sustaining the sector’s growth.

 For the 2025/26 financial year, the Ministry of Construction has allocated Sh2.18 trillion for development projects, including road infrastructure and other strategic initiatives.

However, stakeholders point to regulatory gaps as a key challenge that could undermine the sector’s long-term sustainability.

Mr Njavike said the absence of a comprehensive regulatory framework has led to inconsistencies in market practices, including pricing and professional standards.

 “There is a need for clear guidelines to ensure transparency, accountability and proper coordination within the sector,” he said.

The government is now moving to address these concerns through plans to establish a Real Estate Regulatory Authority under the Ministry of Lands, Housing and Human Settlements Development.

The proposed authority is expected to oversee the sector by developing structured regulations, maintaining market data, monitoring professional conduct and protecting local players from unfair competition, including unregulated foreign agents.