Revealed: Dar’s new emerging ‘gold mine’

Dar es Salaam.As big economies in the US and Europe recover from the real estate crunch, Tanzania’s commercial capital city is developing into the go-to sector if you want quick money--with a 24 percent return on investment annually--The Citizen has learnt.

This means that if you invest $20 million(Sh33 billion) in one of the skyscrapers in the heart of Dar es Salaam, you are sure to earn $4.8 million yearly if you have a full house of tenants. This puts Tanzania’s real estate developers at greater advantage than their colleagues elsewhere, according to experts who spoke to The Citizen.

Buoyed by high rents in Dar es Salaam, which reportedly match those in highly developed cities like Johannesburg and Manhattan, real estate developers have discovered a gold mine in this city of about five million people.

The UK-based Global Property Guide (GPG), a research firm that sells data to investors in residential property, says rental yields are higher in Tanzania than they are in Kenya. To put things into perspective, property developers in Tanzania take an average of five years to recoup their costs in real estate investments.

According to the 2011 report by UK-based firm, rental yields in Tanzania stand at 8.57 percent, one of the highest in Africa along with Uganda, making the market suitable for development of houses for rent instead of for sale.

In Kenya, the rental yield is 6.18 percent while it is 7.47 percent in South Africa.

With the country facing an acute shortage of modern houses in major cities, especially Dar es Salaam, real estate developers of both residential and office buildings have hit a gold mine.

According to National Housing Corporation statistics, Tanzania had a house deficit estimated at three million units valued at $180 billion by the end of 2007. The current annual demand for houses in urban areas is 200,000 units, estimated to cost $12 billion. The housing deficit was expected to grow by 15 percent by the end of 2012.

Monthly rents for a two-bedroomed fully furnished apartment located in posh areas like Masaki, Mikocheni and Oyster Bay range between $3,000 and $8,000. According to data gathered from the local branch of the global real estate firm Knight Frank, office space in areas considered to be high grade stands at $21 per square metre. In the low grade areas, the cost is $16 per square metre. Prime areas office rental areas in Dar es Salaam stand between $31 and $40 per square metre. In Kampala, monthly rent per square metre in the Central Business District ranges between $20 and $25.

Knight Frank pegs prime rents for office space in Nairobi at $15 per square metre per month, with rental yields of six percent annually while prime retail space rental prices are pegged at $31 per square metre per month.