study on the housing sector (tanzania) for shelter afrique · 2013-02-22 · 2 housing study -...

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MAP OF TANZANIA

Source: CIA World Factbook

1 Housing Study - Tanzania

Table of ContentsTable of ContentsTable of ContentsTable of Contents

HOUSING STUDY HOUSING STUDY HOUSING STUDY HOUSING STUDY ---- TANZANIATANZANIATANZANIATANZANIA ........................................................................................................................................................................................................................................................................................................................................ 2222

1.0 CONTEXT ANALYSIS1.0 CONTEXT ANALYSIS1.0 CONTEXT ANALYSIS1.0 CONTEXT ANALYSIS ............................................................................................................................................................................................................................................................................................................................................................................ 3333

1.1 POLITICAL STRUCTURE ............................................................................................. 3

1.2 THE ECONOMY ........................................................................................................ 5

1.6 POPULATION DEMOGRAPHICS (INCLUDE GROWTH AND AGEING POPULATION) ............. 7

1.7 LABOR MARKET ...................................................................................................... 7

SOURCE: WORLD BANK................................................................................................. 8

1.8 CAPITAL MARKETS .................................................................................................. 8

2.0 SITUATIONAL ANAL2.0 SITUATIONAL ANAL2.0 SITUATIONAL ANAL2.0 SITUATIONAL ANALYSIS OF HOUSING IN TYSIS OF HOUSING IN TYSIS OF HOUSING IN TYSIS OF HOUSING IN TANZANIAANZANIAANZANIAANZANIA ........................................................................................................................................................ 9999

3.0 INSTITUTIONAL AN3.0 INSTITUTIONAL AN3.0 INSTITUTIONAL AN3.0 INSTITUTIONAL AND POLITICAL CONTEXT D POLITICAL CONTEXT D POLITICAL CONTEXT D POLITICAL CONTEXT OF HOUSING IN TANZANOF HOUSING IN TANZANOF HOUSING IN TANZANOF HOUSING IN TANZANIAIAIAIA ............................ 11111111

3.1 INSTITUTIONAL ORGANIZATIONS ............................................................................. 11

3.2 NATIONAL HOUSING CORPORATION ........................................................................ 12

3.3 HOUSING POLICY ................................................................................................... 12

4.0 LEGAL AND REGULA4.0 LEGAL AND REGULA4.0 LEGAL AND REGULA4.0 LEGAL AND REGULATORY FRAMEWORK ON LATORY FRAMEWORK ON LATORY FRAMEWORK ON LATORY FRAMEWORK ON LANDNDNDND ........................................................................................................................................................ 13131313

4.1 LEGAL ENVIRONMENT GOVERNING LAND ................................................................ 15

4.2 LAND DELIVERY MECHANISMS ............................................................................... 17

4.3 PLOT SIZE AND DISTRIBUTION OF LAND .................................................................. 18

4.5 OWNERSHIP OF LAND ............................................................................................ 19

4.6 FORCED ACQUISITION OF LAND BY THE GOVERNMENT ............................................. 20

4.7 WOMEN’S RIGHTS TO LAND ................................................................................... 21

4.8 FOREIGN OWNERSHIP OF LAND ............................................................................. 21

4.9 PRIMARY CONSTRAINTS TO THE DEVELOPMENT OF A FORMAL LAND MARKET .......... 22

5555.0 LEGAL ENVIRONMENT.0 LEGAL ENVIRONMENT.0 LEGAL ENVIRONMENT.0 LEGAL ENVIRONMENT GOVERNING HOUSINGGOVERNING HOUSINGGOVERNING HOUSINGGOVERNING HOUSING ........................................................................................................................................................................................ 23232323

6.0 JUDICIAL CONTEXT6.0 JUDICIAL CONTEXT6.0 JUDICIAL CONTEXT6.0 JUDICIAL CONTEXT OF THE HOUSING SECTOOF THE HOUSING SECTOOF THE HOUSING SECTOOF THE HOUSING SECTOR WITH RESPECT TO R WITH RESPECT TO R WITH RESPECT TO R WITH RESPECT TO

MORTGAGESMORTGAGESMORTGAGESMORTGAGES ............................................................................................................................................................................................................................................................................................................................................................................................................................................ 27272727

6.1 JUDICIAL CONTEXT6.1 JUDICIAL CONTEXT6.1 JUDICIAL CONTEXT6.1 JUDICIAL CONTEXT OF THE HOUSING SECTOOF THE HOUSING SECTOOF THE HOUSING SECTOOF THE HOUSING SECTOR WITH RESPECT TO LAR WITH RESPECT TO LAR WITH RESPECT TO LAR WITH RESPECT TO LANDNDNDND ............ 29292929

7.0 BANKING AND FINA7.0 BANKING AND FINA7.0 BANKING AND FINA7.0 BANKING AND FINANCNCNCNCIAL SYSTEM WITH REFEIAL SYSTEM WITH REFEIAL SYSTEM WITH REFEIAL SYSTEM WITH REFERENCE TO THE HOUSINGRENCE TO THE HOUSINGRENCE TO THE HOUSINGRENCE TO THE HOUSING

SECTORSECTORSECTORSECTOR ............................................................................................................................................................................................................................................................................................................................................................................................................................................................................ 30303030

7.1 THE MORTGAGE MARKET IN TANZANIA .................................................................... 33

7.3 TANZANIA MORTGAGE REFINANCING COMPANY...................................................... 35

7.4 CREDIT REFERENCE BUREAU ................................................................................. 36

8.0 THE REAL ESTATE 8.0 THE REAL ESTATE 8.0 THE REAL ESTATE 8.0 THE REAL ESTATE MARKET IN TANZANIAMARKET IN TANZANIAMARKET IN TANZANIAMARKET IN TANZANIA .................................................................................................................................................................................................................... 36363636

8.1 HOUSING DEMAND ................................................................................................ 36

8.2 MAIN ACTORS AND PLAYERS IN THE REAL ESTATE MARKET IN TANZANIA ................. 36

SOURCE: TANZANIA DEMOGRAPHIC AND HEALTH SURVEY 2010 .................................. 38

8.7 TAXATION REGIME8.7 TAXATION REGIME8.7 TAXATION REGIME8.7 TAXATION REGIME ............................................................................................................................................................................................................................................................................................................................................................................ 40404040

9.0 RATIONALE FOR SH9.0 RATIONALE FOR SH9.0 RATIONALE FOR SH9.0 RATIONALE FOR SHELTER AFRIQUE INVOLVELTER AFRIQUE INVOLVELTER AFRIQUE INVOLVELTER AFRIQUE INVOLVEMENT IN TANZANIAEMENT IN TANZANIAEMENT IN TANZANIAEMENT IN TANZANIA ........................................................ 41414141

APPENDIX 1 DISTRIBUTION OF HOUSEHOLD BY CONSTRUCTION MATERIALS................... 42

APPENDIX 2: PROCEDURE FOR REGISTERING PROPERTY .............................................. 43

APPENDIX 3: DEALING WITH CONSTRUCTION PERMITS ................................................. 44

BIBLIOGRAPHYBIBLIOGRAPHYBIBLIOGRAPHYBIBLIOGRAPHY ............................................................................................................................................................................................................................................................................................................................................................................................................................ 45454545

2 H

ousing Study - Tanzania

Housing Study Housing Study Housing Study Housing Study ---- TanzaniaTanzaniaTanzaniaTanzania

Tanzania suffers from a terrible shortage of good quality and

affordable housing. So dire is this shortage that the nation currently

carries a 3 million housing deficit coupled with a 200,000 unit

annual demand. Over seventy percent of its urban residents live in

unplanned and unserviced informal settlements. Only 15 percent of

household in Tanzania have electricity, with a very large disparity

between urban and rural households in Mainland Tanzania (45

percent and 3 percent respectively). Two in three households in

Tanzania (67 percent) live in dwelling with earth, sand or dung

flooring. Cement flooring only accounts for 30 percent of

households. With an ever increasing urban population, 5.7 percent

to 22.6 percent over the period 1967-2002, based on 2002 census

data, it is inevitable that this shortage, which is compounded by lack

of long-term housing finance and a lack of a formal residential

housing construction sector, needs to be addressed in a timely

manner. Over 80 percent of urban residents are tenants, living

under a pro-landlord legislation that forces people to pay annual

rent upfront in the wake of a limited supply of good houses and ever

increasing cost of living. That’s the bad news!

The good news is Tanzania continues to rise from a centrally

planned economy into a market driven economy registering on

average above 6 percent growth consistently over the past five

years. The Government through the Bank of Tanzania has began

the process of initiating the Housing Finance Project (HFP) that will

see the development of a vibrant mortgage market accompanied by

housing microfinance instruments that will allow the markets to

cater for different segments of income distribution. Steps have

already been made towards paving the way through legislation that

support the planned initiatives with the passing of the Mortgage

Finance (Special Provisions) Act 2008 that brought about key

changes to Chapter X of the Land (Amendment) Act 2004 the

principal legislation that oversees the governance of mortgages.

Duly supporting this move is the passing of the Unit Titles Act 2008,

that effectively brought into existence the Condominium law for

managing sectional properties etc. Deepening reforms towards

better financial services are being carried out primarily through the

National Strategy for Growth and Reduction of Poverty (NSGRP) or

MKUKUTA to ensure security of tenure for land and property.

This document aims to provide a broad picture of the current

situation of the housing market in Tanzania. However, information

is scarce and largely non-existent. With no established mortgage

market, no existing housing policy, no private developer association

and a previously lackadaisical National Housing Corporation,

statistics on housing are hard to come by. However, effort has been

made to disseminate information from different parts, departments

and people to ensure that the detail is relevant and a such

informative and thoughtful enough to merit a decision on the way

forward for Shelter Afrique.


1111.0 .0 .0 .0 Context AnalysisContext AnalysisContext AnalysisContext Analysis

1.1 Political Structure1

The Government of the United Republic of Tanzania (GOT) is a unitary

republic based on multiparty parliamentary democracy. All state

authority in the United Republic is exercised and controlled by the

Government of the United Republic of Tanzania and the Revolutionary

Government of Zanzibar. Each Central Government has three organs

namely the Executive, the Judiciary and the Legislature that have

powers over the conduct of public affairs and duly supported by Local

Government authorities. Authority over all Union and Mainland

Tanzania matters is held with the Government of the United Republic of

Tanzania while the Revolutionary Government of Zanzibar maintains

authority over all matters, which are not Union matters, and are

exclusive to Zanzibar.

The President of the United Republic serves as the leader of the

Executive organ which comprises the President, the Vice-President, the

President of Zanzibar and the Prime Minister (day to day head of

government) and the Cabinet Ministers of the Union government. The

Judiciary consists of three organs namely the Court of Appeal of the

United Republic of Tanzania, the High Courts for Mainland Tanzania2

and Tanzania Zanzibar and the Judicial Service Commission for

Tanzania Mainland supported by both Magistrates Courts and Primary

Courts. The Judicial Service Commission for Tanzania Mainland consists

of the Chief Justice of the Court of Appeal of Tanzania (Chairman), the

Justice of the Court of Appeal of Tanzania, the Principal Judge of the

High Court and two members appointed by the President. The Tanzania

1 (Public Administration, 2011)

2 As a passing note, a commercial court was established in September 1999 as a division of the High Court.

Law Reform Commission is responsible for the review of the country’s

laws.3 The

Constitution enacted in 1977 under Article 4 (chapters two, three and

five) provides for legislative supremacy of Parliament (consisting of the

President and the National Assembly) and independence of the

Judiciary while embracing the principles of rule of law, separation of

powers and a pluralistic political system. To this end, the President

assents laws while the National Assembly maintains the authority to

oversee and advise the Government and all its organs in the discharge

of their respective duties. The President of Tanzania and the members

of the National Assembly are elected concurrently by direct popular vote

for five-year terms with the Constitution empowering the President to

appoint an Attorney General and nominate ten non-elected members of

Parliament who can become cabinet members. Traditionally, women

contribute not less than fifteen percent of Parliamentary members. The

Parliament is headed by the Speaker who is assisted by the Deputy

Speaker and the Clerk to the National Assembly as Head of the

Secretariat of the National Assembly supported by various Standing

Committees.

Apart from sharing the Court of Appeal with the United Republic with

Mainland Tanzania, Zanzibar has a distinct and separate legal system

where the High Court of Zanzibar is constitutionally recognized as not

being a Union matter4 and is supported by Kadhi and Magistrates

Courts. Similarly, the Attorney General’s Chambers of Zanzibar fall

outside the purview of Union matters, and it is a department of

Revolutionary Government of Zanzibar.

3 Based on English Common Law 4 Article 114, Constitution of United Republic of Tanzania, 1977

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Local Government Authorities, classified broadly either as urban or

rural, exist to provide law and order while consolidating and giving more

power to the people to competently participate in the planning and

implementation of development initiatives and programmes within their

respective areas. Tanzania is thus divided into 26 regions (mkoa), 21 on

the mainland and 5 in Zanzibar (3 on Unguja, 2 on Pemba); Ninety-nine

(99) districts (wilaya), each with at least one council. 114 councils

operate within these 99 districts of which 22 are urban and 92 rural.

The 22 urban units are further classified as city councils (Dar es Salaam

and Mwanza), municipal councils (Arusha, Dodoma, Iringa, Kilimanjaro,

Mbeya, Morogoro, Shinyanga, Tabora, and Tanga) or town councils (the

remaining eleven communities).

Regional Map of Tanzania


Source: http://mapsof.net/tanzania/static-maps/png/regions-of-tanzania

1.2 The Economy

The mid 1980s saw the Tanzanian economy in severe distress following

several years of a centrally planned economy. However, transformation

has been radical since. Robust economic growth has been evident

hovering around 7 percent per year since 2000. Sound macroeconomic

policies, market-oriented reforms, debt relief and, until recently, a

favourable global environment have been the main drivers o f

Tanzania’s steady growth. The International Monetary Fund (IMF)

distinguishes three broad phases of this transformation: 1970-1985

which was characterised by Ujamaa (socialism) and economic decline;

1986-1995, a period of liberalization and partial reforms; and 1996-

2006, marked by macroeconomic stabilization and structural reforms.

These reforms have continued to the present (Mutero 2010).

Following fifteen years of Ujamaa policy, the economy was gradually

liberalized from 1986 to 1995 to remove state domination in

production and to promote private enterprise. Thus, prices were allowed

to adjust to market levels, interest rates and the exchange rate were

freed and restrictions on economic activities were phased out. Specific

reforms included: (a) restructuring the financial sector and licensing

foreign banks thus expanding private access to finance for investment;

(b) liberalizing trade, a move that triggered an export boom and

restored the country’s foreign exchange reserves; and (c) denying credit

to poorly performing public corporations and subjecting public finance

to greater scrutiny and discipline. One of the country’s main challenges

remains to translate these successes into significant improvement in

employment and poverty reduction. The 2007 Household Budget Survey

shows that poverty incidence fell slightly from 35.7 percent in 2001 to

33.3 percent in 2007, implying an increase in the total number of the

poor, given high

6 H


population growth. The population currently estimated at 42 million5

people has been growing at a pace of slightly above 2 percent per

annum supported by a rapid rate of urbanization (roughly 4.7 percent

(est. 2011) that has seen the urban population grow to 26 percent of

total population6. Reforms within the housing sector saw the winding

up of a bankrupt Tanzania Housing Bank in 1995, which had been

created in 1972 as a part of government’s interventionist economic

policy. The IMF points out that a committed ownership of the reform

process has been key to success, symbolized by Mkukuta, mainland

Tanzania’s own growth and poverty reduction strategy7.

Prior to the mentioned reforms, Tanzania had one of the smallest

banking systems in Africa, dominated by a single commercial bank and

other state-owned financial institutions. After two and a half decades of

liberalization, three dozen commercial banks and many other private

financial institutions are in operation, offering a broad range of financial

services. Since 2000, credit to the private sector has expanded at 30-40

per cent a year, supported by growing customer deposits, and bank

performance has improved8. In spite of these reforms, household

access to credit is appallingly low with a mere 9 per cent of the

population reported as having access to financial services from the

formal sector in 20069. The second generation of financial reforms,

now underway, seeks to broaden the reach of financial services.

Tanzania has been able to hold itself well despite the recent global

economic crisis, although a decline in exports particularly in the

5 (CIA, 2011) 6 (CIA, 2011) 7 IMF (2009); 8 IMF (2009) 9 Financial Sector Deepening Trust (2007) Finscope E-book Tanzania

tourism, commodities and textiles markets that saw growth reduce to

approximately 6 percent in 2009 (see figure 1). A slight recovery was

registered in 2010 as the global economy improved. Strong economic

growth has mainly been driven by tight control over public spending and

structural reforms that have included the reform of the taxation system

and revenue collection, expenditure control and land ownership. Debt

relief under the Heavily Indebted Poor Country (HIPC) and the

Multilateral Debt Relief Initiative also helped reduce the country’s

external public debt burden significantly. Recent banking reforms have

also helped increase private sector growth and investment. Overall, the

economy remains heavily reliant on agriculture which accounts for

slightly more than 40% of the GDP, provides 85% of the exports and

employs 80% of the workforce. The industrial sector which accounts for

less than 10% of the GDP and primarily constitutes the processing of

agricultural products and light consumer goods is among the smallest

in Africa. Mineral production with the extraction of gold reserves is

steadily growing to account for a significant part of Tanzania’s export.

Following a monetary policy that had a clear inflation target over the

past decade, inflation was managed down to single digit levels although

it had been on the rise since 2005, with the latest figures showing

double digit growth10, primarily as a result of consumer goods price

hikes driven by drought, power rationing and increasing international oil

and fuel prices and transportation costs (see figure 1). The shilling

continues to depreciate against a strengthening dollar as inflationary

pressure continues to haunt the domestic scene coupled with demand

for foreign currency by businesses. While the central bank has

managed to control the growth of broad money supply, this has been

10 Culminated to 13.5 percent at the end of 2008 from an average 5.8 percent from 2003-07


done against a backdrop of strong real GDP growth and expansion of

credit growth to the private sector. Nevertheless, the country is

currently

Figure Figure Figure Figure 1111: Tanzania GDP Growth 1998 : Tanzania GDP Growth 1998 : Tanzania GDP Growth 1998 : Tanzania GDP Growth 1998 ---- 2010201020102010

SOURCE: IMF WORLD ECONOMIC OUTLOOK DATABASE, OCTOBER 2010

feeling the pressure on the shilling precipitated by last year’s

presidential and parliamentary elections. Traditionally, exchange rates

are customarily weaker during the first half of the year strengthening,

primarily as a result of dollar demand, during the second half of the

year as exports from cash crops dominate the economic landscape.

Pressure to address corruption has led to the market seeing a reduction

on foreign exchange as foreign donors have cut back on funding putting

more pressure on the demand for foreign exchange.

With respect to interest rates, Tanzania has made considerable

progress in the development of its financial sector but financial markets

are still at a comparatively nascent stage. Robust growth, as

mentioned, along with prudent macroeconomic management has

facilitated a strong expansion of credit by the commercial banks to the

private sector over the last five years. Credit to the private sector

increased from 7.4 percent of GDP in 2003 to 16.2 percent at the end

of 2008. Nevertheless, interest rates remain fairly high with normal

lending conducted around 18 – 20% on average. Business remains

concentrated with the larger banks who dominate the market through

foreign-exchange trading, trade finance and involvement in government

securities. In addition, there has been a decline in interest rates

effectively demonstrating a drive towards a more substantial deepening

and better performance of the financial sector.

1.6 Population Demographics (include growth and ageing population)

Tanzania’s population is currently estimated at 42.7 million. With a

population growth rate of 2 percent per annum, the urban population

now makes up 26% of the general population and is currently growing

at 4.7 percent annually. A staggering 47 percent of the population is

below the age of 30 with females constituting 52 percent of the total

(males 48 percent).11 Life expectancy currently averages approximately

53 years and the literacy rate hovers at approximately 70 percent with

government expense on education making up 6.7 percent of GDP. The

population is 63% Christian and 35% Muslim, with the balance holding

traditional animist beliefs. Ninety-five percent of Zanzibar’s population

is Muslim. Tanzania is also home to about 130 tribal groups.

1.7 Labor Market

The labor market continues to grow in the wake of continued foreign

direct investment (FDI) particularly in the mining and agricultural

sectors. Agriculture employs 80% of the labor force, which is

dominated by smallholder farming, with manufacturing and services

11

(CIA, 2011)

0

2

4

6

8

10

12

14

2000 2001 2002 2003 2004 2005 2006 2007 2008 2009

GDP Growth Inflation

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employing a substantial portion of the balance. Historical recorded

trends show the increase of graduates from Higher Learning Institutions

(HLI) rising from 22,437 in 2002 to 38,774 in 2005 with a doubling of

employed persons from 10,889,205 in 1990/91 to 20,536,000 in

2005/06 (annual averaging of roughly 48,000 new jobs). (Tanzania

Investment Centre, 2008) Many jobs, which are usually low paying and

uncertain, are held within the informal sector as private corporate

companies in various modern sectors such as manufacturing, finance

and tourism demand and practice hand picking of employees based on

the strength of skills and work experience. Such practice has

traditionally made it difficult for new graduates to get jobs. As such, the

inability of the formal sector to absorb increasing numbers of young

people looking for employment has increased the importance of the

informal sector as a source of self-employment.

Table Table Table Table 1111: Labor force and employment in Tanzania: Labor force and employment in Tanzania: Labor force and employment in Tanzania: Labor force and employment in Tanzania Labor Force and Employment

Year Latest data

Population ages 15-64, total 2008 23,250,033

Unemployment, total (% of total labor force) 2008 11.3

Labor force, female (% of total labor force) 2008 31.2

Labor force, total 2008 14,478,825.3

Labor force with primary education (% of total) 2004 50.4

Employees, agriculture, female (% of female griculture, female (% of female griculture, female (% of female griculture, female (% of female employment) 2004 22.3

Employees, agriculture, male (% of male employment) 2004 20.4

Source: World Bank

The lack of finance or start up capital coupled with minimal technical

and entrepreneurial skills has resulted in overall lowered productivity

and earning power. Trading, in the form of buying and selling goods,

has been the preferred choice of entry into the self employment market.

This has historically made the informal sector risky due to lack of safety

and security limiting credible market opportunities. Overall, there exists

a lack of effective implementation of public policies as applies to the

labor market.

1.8 Capital Markets

As a strategy to help Tanzanians mobilise savings and direct them into

investing, the capital market was established in 1994 through the

establishment of the Capital Markets and Securities Authority (CMSA)

that was created to promote and regulate the securities business in

Tanzania. However, marginal progress has been made with the listing

of only 16 firms (five of which are cross listings) on the Dar es Salaam

Stock Exchange (DSE) over the last 15 years. With 7 corporate bonds

valued at TZS 77.7 billion12 and 73 Treasury bonds (valued at TZS 1.62

trillion)13 currently being traded, market capitalization still remains very

low at TZS TZS 4.895 trillion14 (USD 3.19 billion). Overall, the market

has seen foreign investor participation in the equity secondary market

grow from the previous 3.4% of revenue contribution in 2009 to 22.7%

in 2010.

Steps continue to be taken towards integration with the rest of the

stock exchanges of the member countries of the East African

Community (EAC) evidenced by continued cross listings (now five) and

integration of procedures and processes in the wake to the emerging

EAC financial framework through the establishment of a common

market. Efforts are also being made to ensure that the capital account

restrictions are lifted in the next year or two to allow for the acquisition

of shares from citizens of partner states and vice versa along with the

establishment of a rating system for all listed companies to ease and

facilitate cross border trading and sale of shares.

12 (The Dar es Salaam Stock Exchange, 2010) 13 (The Dar es Salaam Stock Exchange, 2010) 14 (The Dar es Salaam Stock Exchange, 2010)


Overall, portfolio inflows remain fairly negligible despite government’s

move to establish the stock exchange to foreign investors. With a lack

of a reasonable number of shares to trade and the limited liquidity, it is

not surprising that the Capital Market still has a long way to go before it

can make a serious impact on the mobilization of savings and

investments.

2.0 Situational 2.0 Situational 2.0 Situational 2.0 Situational Analysis of Housing in TanzaniaAnalysis of Housing in TanzaniaAnalysis of Housing in TanzaniaAnalysis of Housing in Tanzania

To understand the housing situation in Tanzania, one must first

understand that the supply of land is perhaps the most crucial

component in the production of shelter. One of the objectives of this

report is to outline the elements involved in land acquisition in the

country, which notably is owned by the State. The government remains

the sole and primary instrument for land delivery. With notable

inefficiencies, land acquisition, although improving, has been a hurdle

in many aspects towards the development of an efficient housing

market along with the limited availability of mortgage financing to

support housing development. In recent years, the GOT through Ministry

of Lands, Housing, and Human Settlements Division has undertaken a

drive towards implementing key steps such as improved plot allocation

in greenfield areas, land regularization and titling in existing informal

settlements, that will enable it to encourage land development.

Presently, the total housing deficit is estimated at 3 million units up

from 2.2 million in 2000. Rural to urban migration has been a key

driver in creating this deficit as the urban population increased from a

low base of 5.7 percent to 22.6 percent over the period 1967-2002,

based on census data. Annual demand for formal land was 150,000

plots between 1991 and 2001 while supply averaged roughly 8,000

surveyed plots annually, in essence creating an annual shortfall of 95

percent. Between 1990 and 2001 however, the average annual

demand for plots in Dar es Salaam was 20,000 units while average

annual supply was a dismal 700 units (Ministry of Lands, 2007). To this

end, with few or hardly any housing options available in the formal

10 H


sector, over 70 percent of all urban residents, reside in informal

settlements. In this regard, housing development, as practised in

Tanzania, has historically meant that individuals undertake construction

over a period of years. As one would note from a visit to Dar es Salaam,

the uncompleted/unfinished residential housing stock is substantial

with the typical form of tenure being rental. A study undertaken in

1990 indicated that tenants make up 73 percent of households (Hoek-

Smit 1991) and this extends to include a substantial proportion of low

and lower middle income households.

A young girl on her way to school from her apartment in ZanzibarA young girl on her way to school from her apartment in ZanzibarA young girl on her way to school from her apartment in ZanzibarA young girl on her way to school from her apartment in Zanzibar15151515. . . .

In the case of Dar es Salaam, the number of informal settlements has

grown from 40 in 1990 to 54 major unplanned and unserviced

settlements in 2007 with over 100 settlements when peri-urban areas

are included.16 The formal housing construction sector remains very

15 www.oikocredit.org 16 (HABITAT, 2007)


small and is largely being undertaken by the public sector either

through the NHC or the Tanzania Building Agency (TBA), who develop

housing for civil servants or through the pension funds. The private

property developer market is virtually absent with the existing

development aimed at luxury developments catering to expatriates,

wealth individuals or the Tanzanian diaspora overseas.

Typical Typical Typical Typical SemiSemiSemiSemi----Modern Modern Modern Modern Swahili HouseSwahili HouseSwahili HouseSwahili House (UN HABITAT, 2010)

3.0 Institutional and Political Context of Housing In Tanzania3.0 Institutional and Political Context of Housing In Tanzania3.0 Institutional and Political Context of Housing In Tanzania3.0 Institutional and Political Context of Housing In Tanzania

3.1 Institutional Organizations

The Ministry of Lands, Housing and Human Settlements Development

(MLHHSD) has been mandated to administer land and human

settlement in Tanzania on behalf of the President of Tanzania who

12 H


serves as the trustee of all land. The Ministry currently has four major

Departments namely Land Administration, Survey and Mapping,

Physical Planning and Housing. Within the Ministry also lie four core

sector units namely the Registration of Titles Agency, Property

Valuation, and the District Land and Housing Tribunal. The Ministry also

has an agency dealing with Housing and Building materials research

(the National Housing Building Research Agency), a commission dealing

with Land Use Planning (National Land Use Planning Commission) and

the National Housing Corporation.17

3.2 National Housing Corporation

Established by Act of Parliament No. 45 of 1962, the National Housing

Corporation (NHC) was for a long time the main property developer in

the country having constructed 14,145 housing units between 1962

and 1974 before registering significant decline in the construction of

housing stock as a result of limited government budget, increased

construction costs and high inflation rates. Many of the properties

which were constructed during the mentioned period were under slum

clearance, rental and tenant purchase (TP) schemes and were funded

largely from Donor funding. Between 1975 and 1989, the Corporation

constructed 1,894 units at a cost of about TZS 360 million.

Subsequently thereafter, NHC constructed a mere 762 units between

1990 and 2007.18

NHC has equally been responsible for managing its rental housing stock

aside from building houses. However due to rent control being a

government institution and limited ability to access longer term finance,

the company was largely unsuccessful in delivering its mandate. A

major overhaul of the National Housing Corporation was carried out last

year and included the recruitment of a new board and executive team to

17 (Background: Ministry of Lands, Housing and Human Settlements Development)

18 (The Ministry of Lands, Housing and Human Settlements Development, 2007)

spearhead the Corporation’s effort to become a master estate

developer by 2015 through a strategy that would incorporate the

acquisition and development of key land parcels. According to the

company’s five year strategic plan, which envisages increasing the

housing sector GDP contribution to 4 per cent (currently at 1 per cent)19,

the organization expects to develop a minimum of 15,000 houses for

sale and lease by June 2015. This would encompass the construction

of 10,000 medium and high class homes and an additional 5,000

homes aimed at low income bracket buyers.

3.3 Housing Policy

Having inherited no housing policy from its colonial master, Tanzania

has struggled to develop its own Housing policy. Despite government’s

continued confirmation that housing is a priority, insufficient attention

towards the establishment of a proper housing directorate that would

support and facilitate the creation of a national and comprehensive

housing policy, has been historically been found wanting. A policy was

previously formulated in 1981 with the intention of creating the much

needed framework for the housing sector development but it was

neither approved nor implemented due to government budgetary

constraints and a change in the country’s economic policy from a

central to market driven economy.20 While housing development in

Tanzania is guided by the National Human Settlements Development

Policy of 2000, the policy’s objectives largely caters towards the

provision of adequate shelter, an efficient land delivery system, service

provision and better rural housing without specifically addressing the

problems within the housing sector. Efforts are currently underway

towards developing a housing policy that will aim to the address key

issues surrounding the housing sector.

19 (Luhwago, 2010) 20 (Ministry of Lands, 2007)


Table Table Table Table 2222: Summary Evolution of the Housing Department since inception: Summary Evolution of the Housing Department since inception: Summary Evolution of the Housing Department since inception: Summary Evolution of the Housing Department since inception

Years Ministry

1964 - 1965 Ministry of Local Government and Housing

1965 - 1969 Ministry of Health and Housing

1970 - 1984 Ministry of Lands, Housing and Urban Development

1984 - 1992 Was housed in various ministries including: Local Government Community Development Cooperatives and Marketing The Prime Minister’s Office Local Government and Cooperatives Lands, Water, Housing and Urban Development Natural Resources and Tourism

Presently Ministry of Lands, Housing and Human Settlements Development

Table 2 above demonstrates the level of priority that has been granted

to housing. Despite these shortcomings however, the Government in its

efforts to intervene on the housing situation, has prompted various

initiatives to spur housing development. Some of the initiatives have in

the past included:-

The creation of the Registrar of Buildings (RoB) which was created by

Act of Parliament No. 13 of 1971 and was later dissolved into the

present NHC in 1990. The institution turned out to be grossly

underperforming having constructed a total of 530 housing units in its

18 years of operation between 1971 and 1989 .

The Better Rural Housing Campaign – Launched in 1974, this campaign

was geared towards getting rural inhabitants to construct better housing

through a system that comprised the creation of a Village Management

Training Programme (VMTP) and Rural and Urban Construction Units

(RUCU). 84 RUCUs in 84 districts across the country were set up but

eventually, due to lack of proper management and poor training in the

use of equipment, the programme was equally dissolved.

The creation of the present day University College of Lands and

Architectural Studies (UCLAS) to train and build capacity for housing

research and development has been largely successful in churning out

professional for the industry.

These efforts also included other initiatives such as encouraging

parastatals and other public institutions to construct employer based

housing but failed following economic difficulties. Housing cooperatives

whom, given their strong influence back in the 60s and 70s, received

government support through various subsidies but eventually fell victim

to mismanagement and administrative weaknesses.

4.0 Legal and Regulatory Framework on Land4.0 Legal and Regulatory Framework on Land4.0 Legal and Regulatory Framework on Land4.0 Legal and Regulatory Framework on Land

14 H


Following independence in 1961 from Great Britain, Tanzania adopted

“African socialism” that one would argue completely redefined the

property rights regime in the country. As such, the current legal

framework governing land is best understood in relation to the post-

independence history of Tanzania. Due to the adoption of the African

socialism ideology, all land was considered public land with the

President serving as trustee for the people, largely abolishing the

chieftain and individual rights held under customary law. With all

previous customary land rights abolished, the district and village

governance systems (village councils) were established to administer

both land allocation and management. Operation Vijiji, which

effectively operationalized the ujamaa system, went into effect in 1973

with the intention of bringing together rural and scattered residents into

communal villages serving between 2000 and 4000 people. A large

cross section of society (roughly 75% of the total population) was

affected by this policy which aimed at bringing about better efficiency in

the delivery of public services while creating large scale collective farms

that would ensure a balanced approach to the creation of improved

standards of living for the rural communities and the nation at large.

With the change in government in 1985, a reversal of this policy was

put into place having recognized as a Ujamaa as a failure in many

aspects. When the villagization project was abandoned, many people

opted to settle back in their original homeland, only to find other people

had settled there, effectively creating confusion over land tenure issues

with many disputes all over the country. The government swiftly moved

to institute major changes that led to the formation of a Land

Commission to review existing laws, gather input from key stakeholders

and to provide its recommendations to government on a proposed new

legal framework. After three years of work, the Commission issued a

report in 1994 with recommendations that brought about changes that

are still being put in place today. Customary law and individual rights

were once again reinstituted. In 1995, the government adopted a Land

Policy that set out the fundamental principles guiding land rights and

management. Members of the Land Commission and civil society

challenged the policy for failing to take into account all the

recommendations of the Commission and the interests of civil-society

groups such as the Gender Task Force. Central control of land was

maintained by the Government which reaffirmed that all land in

Tanzania is considered public land vested in the President as trustee on

behalf of all citizens. Observers also criticized the policy as supporting

foreign and commercial interests by providing for broad land acquisition

rights and failing to adequately recognize and address the need for

affirmative measures to change patrimonial and male-dominated

practices that prevented women from realizing equal land rights.21

Presently however, the principles set forth in the Land Policy (and again

in the Land Act enacted four years later) are as follows:-

1. The law shall recognize existing rights to land and longstanding

occupation or use of land.

2. Land legislation shall facilitate an equitable distribution of and

access to land by all citizens.

3. Land legislation shall encourage productive and sustainable use of

land.

4. Each interest in land has value that should be taken into

consideration in any transaction affecting that interest.

5. Citizens shall participate in decision-making on matters connected

with their occupation or use of land.

6. A land market shall be facilitated in such a manner that rural and

urban small-holders and pastoralists are not disadvantaged.

21

(United States Agency for International Development (USAID), 2010)


7. A system of land dispute resolution shall be established that is

independent, expeditious and just;

8. Land information shall be accessible to the population.

9. Women shall have the same rights as men have to acquire, hold, use,

deal with, and transfer land. (GOT Land Policy 1995)

4.1 Legal Environment Governing Land

Tanzania’s Land Act adopted from the Land Policy in 1999 classifies

land as: (1) reserved land; (2) village land, which falls under the Village

Land Act; and (3) general land. Reserved land includes land protected

by law or designated land such as national parks, land for public utilities

(i.e highways and those under the Town and Country Planning

Ordinance), wildlife reserves and land classified as hazardous, which

designates land whose development would pose a hazard to the

environment (e.g., river banks, mangrove swamps). Village land, on the

other hand, includes registered village land (i.e. land that belongs to

registered villages), land demarcated and agreed to as village land by

relevant village councils, and land (other than reserved land) that

villages have been occupying and using as village land for 12 or more

years (including pastoral uses) under customary law. It is important to

note that the village councils do not own the land, they only manage it.

A village is an administrative unit in the local government system and

usually has a population between two and four thousand.

All other land is classified as general land, that is to say all land that is

not reserved land or Village Land. However, the act opens up for

ambiguity: “‘general land’ means all public land which is not reserved

land or village land and includes unoccupied or unused village land”

(Sundet, 2005). The definition of General Land in the Village Land Act

does not include the last part of the sentence.

KEY LEGISLATION GOVERNING LANDKEY LEGISLATION GOVERNING LANDKEY LEGISLATION GOVERNING LANDKEY LEGISLATION GOVERNING LAND

Along with policy, legislation has been enacted to set legal a framework for

implementing the policy objectives. The land development related legislations

already in place are:-

1. The Land Act, No. 4 of 1999 which provides for the basic law in relation to

land other than the village land and sets the legal framework for implementing

the objectives of the National Land Policy for granted Right of Occupancy. The

Land Act as amended in 2004 created the platform for review of the legal

framework for mortgage finance in Tanzania for the purpose of redressing the

balance between the interests of the mortgagor (borrower) and those of the

mortgagee (lender).

2. The Village Land Act, No.5 of 1999 provides a legal framework for the

management and administration of land in the village and other related

matters (i.e. the formalisation of customary land rights).

3. The Land Disputes Act No. 2 of 2002 which creates a conflict resolution

mechanism for issues concerning land

4. The Urban Planning Act No. 8 of 2007 which replaced the Town and Country

Planning Ordinance, Cap 378 of 1956 as amended in 1961. This Act provides

for the orderly and sustainable development of land in urban areas.

5. The Land Use Planning Act No. 6 of 2007 provides for procedure for the

preparation, administration and enforcement of land use plans in rural areas.

6. The Town Planners Registration Act No. 7 of 2007 oversees the practice of

the Town Planning Profession.

7. The Unit Titles Act no. 16 of 2008 sets out the rules and procedures for the

management and regulation of divisions of buildings into units, clusters, blocks

and sections, owned individually or in common use for the purpose of

promoting efficient and effective use of landed property in Tanzania. In other

territories, it would be referred to as the Condominium Law.

8. Mortgage Finance Act No. 17 of 2008 provides for amendments to the Land

Act, the Land Registration Act and Civil Procedure Act to make needed

provisions to allow for development, promotion and more efficient

management of the mortgage financial market.

16 H


With a surface area of 94.3 million ha, Tanzania only has 5 percent

(approximately 5.1 million ha) cultivated. An area twice this size, (10

million ha.), is arable land that is not cultivated, but to a large degree

used as pasture, first of all by pastoralists. Almost a quarter of the

surface area, 23%, is reserves, a larger share than any other country in

Sub-Saharan Africa (Lange, 2008).

The Village Land Act 1999, which governs village land, falls into one of

three categories: (1) communal land (e.g., public markets and meeting

areas, grazing land, burial grounds); (2) occupied land, which is usually

an individualized holding or grazing land held by a group; and (3) vacant

land, which is available for future use as individualized or communal

land (specifically encompassing unoccupied land within the ambit of

village land, as opposed to general land). The Act does not recognize

grazing land as a separate category, but pastoralists can assert

customary rights of occupancy to grazing land (United States Agency for

International Development (USAID), 2010)

Each village has a Village Government. Village land is administered by

the Village Council on behalf of the Village Assembly (all members of a

village 18+ years). Members of the village government are

hamlet/sub-village chairpersons, a Village Chairperson, and a hired

Village Executive

Table able able able 3333: Land Use in Tanzania: Land Use in Tanzania: Land Use in Tanzania: Land Use in Tanzania

Land use Million ha

Forest Reserves 10.1

Arable land, not cultivated 10.0

Game Reserves 7.7

Cultivated Land 5.1

National Parks 4.2

Source: (Lange, 2008)

Officer. Three to four villages make up a ward although there remains a

lot of uncertainty concerning the borders and size of village land.. At the

ward level, there is a Ward Development Committee, and a hired Ward

Executive Officer. During local elections, citizens elect a councillor who

represents the ward in the Full Council meetings at the District Council.

In elections up to 1980’s traditional leaders were often elected sub-

village leaders and councillors, and in some areas former chiefs

became Village Council Chairmen. Over the two last decades this trend

has changed, since communities increasingly elect educated, younger

persons (United States Agency for International Development (USAID),

2010).

Land Governance

Tanzania’s 26 regions (21 Mainland and 5 Zanzibar) are divided into

ninety nine (99) districts and further subdivided into divisions. On the

mainland, urban authorities consist of city councils, municipal councils

and town councils while district councils, township councils and village

councils make up the rural authorities. In Zanzibar, the framework

consists of town councils, municipalities and district councils. District

councils coordinate the activities of the township authorities while

village councils, approve village council bylaws and coordinate land use

planning district-wide. The village and township councils have the

responsibility for formulating plans for their respective areas which

extends to managing village forest reserves and collecting revenue.

Village councils are elected by the village assembly made up of adult

residents above the legal age. One-quarter of the council must be

female. The urban and district councils are comprised of members

elected from each ward, plus women appointed by the National

Electoral Commission in proportion to the number of elected positions

held on the council (not less than one-third.


Village land use and allocations are the responsibility of the village

council. A village adjudication committee marks land boundaries, sets

aside land for rights-of-way and settles boundary disputes between

villagers. The village assembly serves as the main authority on all

matters with respect to policy making for the affairs of the village. To

such end, approval for the allocation of land must be sought from the

village assembly following identification of land by the village council.

The village council’s authority is also circumscribed by the district

council, which will hear appeals from decisions of the village council,

and by the Land Commissioner (URT, Village Land Act, 1999).

4.2 Land Delivery Mechanisms

Land purchase, informal land transactions, municipal land allocations,

inheritance are some of the more common avenues of obtaining formal

and informal land. Historically, squatting has led to the creation of

many informal sectors and was particularly prevalent particularly in

urban areas. However, Government, over the past decade, has been

carrying out best efforts to try and formalize where possible. Historically

also, where land is abundant, an occupier could very easily take

possession by clearing and cultivating the land particularly in areas

where inhabitants are few. Generally, companies do obtain land use

rights through the central or local government when seeking land for

either commercial or industrial development opportunities.

In urban areas, a business wishing to register rights to purchased land

must pay a fee equal to 4.4% of the property value. The registration

process takes an average of 73 days and requires nine steps: (1)

conduct an official search at the Land Registry; (2) obtain

documentation from the Ministry of Lands verifying payment of land tax

for 10 years; (3) obtain a property tax clearance from the municipality

for the 10-year period; (4) obtain a valuation report; (5) arrange for

inspection of the property by a government valuer to determine its

value; (6) draft the land- sales agreement and have it notarized; (7)

obtain approval for the transfer from the relevant municipal authority;

(8) obtain a capital-gain tax certificate; and (9) deliver the transfer deed

to the Land Officer for its recording under the buyer’s name in the land

registry. (The World Bank, 2011) The Land Act recognizes the validity of

customary rights of occupancy without the need to issue and register a

formal certificate. In theory, however, certificates are required to

mortgage the land right to secure a loan.

As a passing remark, the Village Land Act provides a process for village

councils to issue certificates for customary rights of occupancy.

According to the Act, the steps for obtaining a certificate of customary

right of occupancy to village land are: (1) application for a certificate to

the village council by the landholder; (2) council review of the

application; (3) issuance of a letter of offer stipulating development

conditions, yearly rent and other conditions; (4) the landowner’s written

agreement to these conditions on a prescribed form; and (5) issuance of

the certificate. Nevertheless, the validity of many certificates should be

discounted given that issuance is usually precipitated by personal ties

and connections and hence it does not form for good collateral for a

lending arrangement. In both cases, spouses registering land must co-

register. The registrar is required to register both spouses as occupiers

in common, which grants each spouse rights to half of the undivided

whole of the property. Even if land is registered in the name of one

spouse, the other spouse has a legal interest in the land.

Overall, a lack of resources and capacity within government and local

authorities with respect to land administration and delivery has caused

inefficiencies in the creation of a formal land market. Rapid

urbanization has equally allowed for an informal land market, through

the creation of unplanned and unserviced settlements, to blossom.

18 H


Although progress has been made to ensure better procedures are in

place for acquisition and registration of land, transfer and disposition of

such land still remains a hurdle.

4.3 Plot Size and Distribution of Land

The existing standards for urban residential plots at 400-800m2, 801-

1,200m2 and above 1,201m2 for high, medium and low density plots

respectively have also created challenges in overall planning standards.

Based on the 2002 Population and Housing Census, the average

household size was estimated at 4.9 while the population density was

estimated to be 39 persons per sq. km overall (National Bureau of

Statistics). It is estimated that approximately 10.5 million people live in

urban areas, and of those, between 70% and 80% of urban residents

live in informal settlements.

4.4 Security of Tenure

All land in Tanzania is considered public land. As such, there is no

freehold land. The President of the country serves as the trustee of the

land as prescribed in the Land Act. Legally, there are two main types of

land tenure systems in the country: statutory and customary. Statutory

tenure rights can further be subdivided into three categories, namely

granted right of occupancy; occupancy under Letter of Offer; and

derivative right while under customary tenure, classification can

categorically be subdivided into quasi-customary and informal tenure.

Granted right of occupancy

Granted rights of occupancy are available for general and reserved land,

and may be subject to any statutory restrictions outlined in the terms of

the grant. The Government grants its citizens renewable rights of

occupancy on land that has been surveyed of up to 99 years (or with

periodic grants of fixed terms such as 33 or 66 years) at a premium and

revisable annual land rent. To be valid, the right has to be registered

under the Land Registration Ordinance Chapter 334. This is what is

recognized as a proper title deed. Holders of registered granted rights of

Figure 2: Existing Land Tenure Systems in Tanzania

Source: (UN HABITAT, 2010)

occupancy may lease that right of occupancy or part of it to any person

for a definite or indefinite period, provided that the maximum term

must be at least ten days less than the term of the granted right of

occupancy. Leases shall be in writing and registered. Short-term leases

are defined as leases for one year or less; they may be written or oral

and need not be registered.

Occupancy under Letter of Offer

Once a citizen is issued with and accepts a letter of offer, he/she can

register the duly signed and sealed letter of offer under Registration of

documents Ordinance Chapter 117 which becomes a valid document

that creates notice of ownership. The premiums, survey fees and the

land rent fees under the Granted right of occupancy and Occupancy

under Letter of Offer, differ from one place to another within the same

city or municipality depending on a number of factors including location

Existing Tenure

Systems

Statutory

Granted Right of Occupancy

Occupancy under Letter of

Offer

Derivative Right

Customary

CustomaryQuasi-

CustomaryInformal


(for example, prime areas are priced highly; size of the plot; use to

which the land is put; availability of basic infrastructure and services;

etc). (UN HABITAT, 2010)

Derivative right

Under the Land Act (1999) the government offers a “residential

licence”, which is a right derivative of a granted right of occupancy on

general or reserved land. According to the Act, a residential licence is a

right conferred upon the licensee to occupy land in urban and peri-urban

non-hazardous land, land reserved for public utilities and surveyed land

for a term not less than six months and not more than two years. The

term can, however, be renewed for the same period. Like occupancy

under letter of offer, the residential residence is issued under

Registration of documents Ordinance Chapter 117.

Customary tenure

This is acquired by virtue of being a member of a community and is

based on traditional acceptance. The system has no formal documents

and no land transfer takes place without the blessings of the

clan/community members. This land belongs to registered villages

although the councils do not own the land but only manage it on behalf

of the village assembly (all members of a village of adult age (18 years

and above). To this end, villages can demarcate the land, register

ownership rights and issue certificates to support such ownership.22 23

Holders of customary rights of occupancy may lease and rent their land,

subject to any restrictions imposed by the village council.

22

Government of Tanzania 1999, Village Land Act No. 5 23 (United States Agency for International Development (USAID), 2010; Sundet, 2005)

Quasi-customary tenure

As the name suggests, the influence of the clan/community in land

transfer is, among other things, diminished. While local leaders and

adjoining landowners are consulted when the need to transfer land

arises, the right to sell lies mainly with the individual right holder.

Customary and quasi customary forms of tenure are commonly found in

peri-urban unplanned areas of the city of Dar es Salaam (UN HABITAT,

2010)

Informal tenure

In the case of informal tenure, land transfer is not guided by customary

or quasi-customary norms and rules. It can take place between any

person seeking land and the respective owner of the land. Buyer

interests are protected, albeit in informal ways, through a system that is

set in such manner that the ownership is deemed to be authentic.

The above Government’s approach to upgrading settlements in lieu of

clearing entire settlements for redevelopment has helped encourage

greater security of tenure in urban centres. Urban growth, peri-urban

expansion and commercial development have created tenure insecurity

given the lack of proper planning and service provision of key

infrastructure support systems like water and waste management in

certain areas. Occasional land acquisition by Government for

infrastructure-development has also created a sense of tenure

insecurity although prudence in observing road leeways and a grasp of

possible future developments within an area can help mitigate that

insecurity.

4.5 Ownership of Land

While in principle, rights of occupancy can be bought, sold, leased and

mortgaged in Tanzania, the land market is inhibited by many layers of

20 H


government control, in practise. The formal market for transfers

requires government approval, and land received through grants must

be held for three years before the landholder can sell the rights. The

transfer of a granted right of occupancy must be approved by the

municipality and registered. A holder of a customary right of occupancy

can sell the right, subject to the approval of (and subject to any

restrictions imposed by) the village council. Mortgages are regulated by

formal law, and land rights must be registered before they can be

mortgaged (URT, Land (Amendment) Act, 2004). There is a very limited

formal land sale market in Tanzania, and little information is available

concerning its operation. Only a small percentage of land is registered,

and most of what is registered is in urban areas. Most land transactions

occur on the informal market, and these tend to be leases. In rural

areas, land sales were historically conducted between members of

families or clans; landholders tended not to sell rights to

Inscription on house wall stating “Hapauzwi, ogopa matapeli” which in English Inscription on house wall stating “Hapauzwi, ogopa matapeli” which in English Inscription on house wall stating “Hapauzwi, ogopa matapeli” which in English Inscription on house wall stating “Hapauzwi, ogopa matapeli” which in English

reads, reads, reads, reads, “Not for sale, Beware of conmen”“Not for sale, Beware of conmen”“Not for sale, Beware of conmen”“Not for sale, Beware of conmen”24242424

buyers from outside the village. Since the end of the villagization

project, and in keeping with the growing commoditization of land, the

informal market has expanded; there is increasing demand for land in

productive areas and areas with high potential for commercial

development. In some cases investors and land speculators follow

formal procedures to obtain land rights, but in many cases buyers

proceed informally, negotiating with traditional village authorities and

government bodies, with the transaction evidenced by an informal deed

signed by representatives of the official or traditional village authorities

(United States Agency for International Development (USAID), 2010)

4.6 Forced Acquisit ion of Land by the Government

Forced acquisition of land by Government is usually carried out where

Government wishes to pave way for infrastructure development or in

some cases, the redistribution of land. The legislation governing land

acquisitions provide for notice to be provided at least six weeks prior to

acquisition. The President is provided with the mandate to shorten that

period if necessary. The government is required to promptly pay

landholders fair compensation, which includes an annual interest of 6%

for any delay in payment. Historically however, Government has on

many occasions been unfair in its compensation especially where

village land has been converted into general land. The Land Act

identifies seven factors to be considered in determining fair

compensation: (1) the market value of the property; (2) disturbance

allowance; (3) transport allowance; (4) loss of profits or

accommodation; (5) cost of acquiring the subject land; and (7) any other

cost loss or capital expenditure incurred in the development of the

24

Photograph from www.greatmirror.com


subject land. The government can offer landholders alternate land in

lieu of or in addition to monetary compensation (GOT Village Land Act

1999b; GOT Land Act 1999a).

In some cases, investors have circumvented the requirement for

government land expropriation and dealt directly with villages. Village

councils may be incentivized to negotiate directly with investors rather

than wait for government intervention because the councils have an

opportunity to set annual rent and request premium payments from the

investors (United States Agency for International Development (USAID),

2010)

4.7 Women’s Rights to Land

The Constitution and formal law provide for equal rights to property and

prohibit discrimination on the basis of sex. Furthermore, the Land Act is

clear that women shall have the same rights as men have to acquire,

hold, use, deal with, and transfer land while stating that customary law

cannot be used to discriminate against women. Women’s

representation is duly required and is mandatory in the various

administrative institutions governing land as in the case of village

councils. Tanzania’s Marriage Act (1971) requires registration of both

monogamous and polygamous marriages. Married women are

permitted to hold property individually, and polygamous wives have

individual rights to hold property. Married couples are presumed to hold

land jointly in the case of a marital property which is co-registered with

spousal consent being required where marital property is transferred or

mortgaged. Where Shari’a law applies, as in the case of muslims, that

women would generally receive one-half the share of men, and a widow

with children receives a one-eighth share of her deceased husband’s

estate (one-fourth if there are no children).

4.8 Foreign Ownership of Land

Under the Tanzania Investment Act 1997, non-citizens are legally

permitted to own land solely for the purpose of investment and have to

do it through the Tanzania Investment Centre or where an interest in

land under a partial transfer of interest by a citizen for purposes of

investment, as in the case of a joint venture, seek approval from the

Tanzania Investment Centre. In principle this is done through the

Tanzania Investment Centre which plays the role of a broker. The 2004

Land (Amendment) Act permits the sale of bare land and allows

The Constitution and formal law provide for equal rights to property and The Constitution and formal law provide for equal rights to property and The Constitution and formal law provide for equal rights to property and The Constitution and formal law provide for equal rights to property and

prohibitprohibitprohibitprohibitssss discrimination on the basis of sexdiscrimination on the basis of sexdiscrimination on the basis of sexdiscrimination on the basis of sex....25252525

mortgage financing as a means of encouraging domestic and foreign

investment. It should be noted however, that only 50,000 hectares were

transferred to foreign investors for the five year period between 2004

25

Photograph from www.greatmirror.com

22 H


and 2009 despite the government holding 2.5 million hectares under

the Tanzania Land Bank Scheme which was created under the

Investment Act. The underlying problem has been the inability of the

government to provide sizeable tracts of land that is not scattered

effectively making it a disincentive for foreign investors.

4.9 Primary Constraints to the Development of a Formal

Land Market

In summary, the key constraints to development of the formal land

market include: (1) the requirement for pre-sale notification to the Land

Commissioner about the intended transaction; (2) the requirement that

the Commissioner acknowledge such notification as a condition for

registering the transaction; (3) prohibition of sale of land rights held for

less than three years; and (4) the ability of the Land Commissioner to

void a land transaction anytime within two years of the transaction, if

the Commissioner has reasonable cause to believe there has been

fraud, undue influence or lack of good faith in the transaction (URT,

Land Act, 1999), (URT, Village Land Act, 1999)


New commercial development in a Dar es Salaam suburb.New commercial development in a Dar es Salaam suburb.New commercial development in a Dar es Salaam suburb.New commercial development in a Dar es Salaam suburb.26262626

5555.0 .0 .0 .0 Legal Environment governing housingLegal Environment governing housingLegal Environment governing housingLegal Environment governing housing

The following policy and legal instruments provide guidance for

acquisition of land and associated properties coupled with necessary

compensation and resettlement procedures, when required, in

Tanzania. (Juma & Abdul, 2009)

Constitution of the United Republic of Tanzania (1977 - as amended)

The Constitution provides for the protection of the rights and interest of

citizens in matters concerning their property and acquisition. Under

article 24 (1), every person is entitled to own property, and has a right to

the protection of his property held in accordance with the law. Sub

article (2) prescribes that it is unlawful for any person to be deprived of

property for any purposes without the authority of law, which makes

provision for fair and adequate compensation.

The National Human Settlements Development Policy (2000)

The policy promotes the development of sustainable human

settlements with a remit to make serviced land available for shelter and

human settlements development to all sections of the communities

through the improvement and provision of infrastructure and social

services. Although it does not cover housing adequately, it remains the

principal legislation governing housing in Tanzania. A Tanzania Housing

Policy, currently in final draft, will be enacted with specific reference to

26 Photograph from www.greatmirror.com

the housing situation in Tanzania albeit in parity with this prevailing

policy.

National Land Policy (1996)

The overall aim of the National Land Policy among other things is to

promote and ensure a secure land tenure system in Tanzania that

protects the rights in land for all its citizens. The policy provides that a

dual system of tenure, which recognizes both customary and statutory

rights of occupancy as being equal in law be established. The Land

Policy directs that land be graded as a Constitutional category. That

compensation should be paid to any person whose right of occupancy or

recognized longstanding occupation or customary use of land is revoked

or otherwise interfered with to their detriment by the state and the Acts

or is acquired under the Land Acquisition Act Cap 118. In principle the

Minister responsible for land matters is the sole authority in land issues.

To address the problem of multiple land allocations, and its resultant

disputes, the Commissioner for lands is the delegated sole authority for

administration of land. However, the policy stipulates involvement of the

public and private institutions whose functions are associated with land

i.e. local authorities, communities, non-governmental organizations and

community based development organizations – to participate and

cooperate with the Minister at different levels during the

implementation of the policy and utilization of land. According to the

policy, land in towns is governed by the City, Municipal or Town Councils.

The administration of village land is vested in the village councils the

councils have to consent before any alienation of village land is

affected. In case of land allocations, the village councils should report to

respective village assemblies.

The Land Act, 1999 (Act No 4/1999)/ Land (Amendment) Act 2004

The Land Act is the principle land legislation on all land matters and

covers the underlying legislation surrounding mortgages in Tanzania

24 H


under Chapter X of the Act. The Land Act signifies that land in Tanzania

is public land and remain vested in the President as trustee for and on

behalf of all citizens of Tanzania. For the purposes of the management

of land under the Land Act and all other laws applicable to land, public

land is in the following categories: (1) general land; (2) village land and

(3) reserved land. The transfer of land from one category to another is

provided in the Act. The Act specifies that an interest in land has a

value and that value is taken into consideration in any transaction

affecting that interest. The recognized land ownership is the granted

right of occupancy and customary ownership. The act states that where

persons with a right of occupancy (including land which is occupied by

persons under customary law) are to be moved or relocated, they must

be compensated for loss of interest in the land and for other losses.

They also have the right to reap crops that are sown before any notice

for vacating that land is given. Assessment of compensation on land

acquired shall be based on the following:

i) Market value of the real property;

ii) Disturbance allowance; iii) Transport allowance;

iii) Loss of profit or accommodation;

iv) Cost of acquiring or getting the subject land;

v) Any other cost loss or capital expenditure incurred to the

development of the subject land

vi) Interest shall be charged at market rate.

Mortgage Finance (Special Provisions) Act, 2008

The passing of this act has created a lot of momentum in government

for the development of housing finance. The act amended certain

written laws with a view to providing further provisions for mortgage

financing and enables Estate Developers to access long term loans

from the banks to build houses and sell to buyers. The act also intended

to help to provide funds for acquisition of low cost housing and not just

for mansions and skyscrapers. Formerly the procedure for transfer of

mortgaged property was long and cumbersome. Under this act, this

process involves only three parties, the mortgagor, the Bank and the

Registrar of Titles. All other interested parties, including the

Commissioner for Lands are notified by the Registrar after the

completion of the mortgage process. Under this act, the bank and the

borrower enter into a contract and if the borrower breaches the

contract, they are given a notice of 60 days to pay, after which his/her

property are sold (to pay back the loan) without involving the court.

The Unit Titles Act, 2008 (Act No. 16 /2008)

The enactment of this act has significantly improved the prospects for

mass housing production and the demand for mortgages. The act

enables, Estate Developers to construct high rise and buildings and

multi-face structures with a big number of flats (or units) and sell each

unit to as many buyers; and each unit buyer is eligible to get a title deed

after completing the sales agreement. This act provide for the

management of the division of buildings into units, clusters, blocks and

sections owned individually of co-owned and use of designated areas; to

provide for issuance of certificate of unit titles for the individual

ownership of the units, clusters or sections of the building, management

and resolution of disputes arising from the use of common property; to

provide for use of common property by occupiers other than owners and

to provide for related matters.

The Village Land Act, 1999 (Act No.5/1999)

The act provides that the Village Council, the organ upon which the

President has delegated powers to manage village land is obliged to

ensure that the village prepare an appropriate village land use plan for

sustainable development, to enter into agreement with neighbouring

villages, to ensure that joint Village Land use plans are prepared for


areas which are used jointly. Preparation of such plans among other

things includes setting aside areas for community uses including areas

for schools, dispensaries, water catchments, water supply utilities,

market places, burial areas, offices etc.

The Urban Planning Act, 2007 (Act No. 8/2007)

The Urban Planning Act No 8 of 2007 provides power for creating plans

in advance of development and a comprehensive system of

development control. It provides for the declaration of planning urban

areas by the Minister responsible for Urban Planning in consultation

with Local Authorities and constituting area Urban Planning committees

and procedures for preparation of schemes and the approval by the

Minister. The general planning schemes which came to be known

popularly as master plans continued to be the primary planning and

management tool for guiding urban development in Tanzania for more

than forty years. These provided for overall planning of planning are

facilitating preparation of detailed schemes and project plans.

The Land Acquisition Act, 1967 (Act No 47/1967)

The Land Acquisition Act of 1967 stipulates the power and procedures

for acquiring land and the required degree of compensation. Section 3

and 4 of the Act gives the President of Tanzania powers to acquire any

land for any estate or term where such land is required for public

purpose such as exclusive government use, general public use, any

government scheme, development of social services or commercial

development of any kind including declamation. The act makes

provision for the procedures and method of compulsory acquisition of

land for public purposes whether for temporary or permanent use. The

Minister responsible for land may authorize any person to enter upon

the land and survey the land to determine its suitability for a public

purpose. The Government of Tanzania is supposed to pay

compensation to any person who suffers damage as a result of any

action. Any dispute as to compensation payable is to be referred to the

Attorney General or court for decision. The Land Acquisition Act does

not go beyond compensation. It is not required under the Act to provide

alternative land for the affected people by the project. Each affected

person entitled to be compensated; on receipt of his/her compensation

is expected to move and has no further claim. Once they are promptly

and adequately compensated, then the obligations stop there. This act

also sets out the legal process for payment of compensation.

Land (Assessment of the Value of Land for Compensation) Regulations,

2001

Land (Assessment of the Value of Compensation) Regulations, 2001

were made under section 179 of Land Act no. 4 of 1999. Regulation 3

of the Land (Assessment of the Value of Land for Compensation)

Regulations, 2001 and Part III of the Village Land Regulations, 2002

provide for practical guidelines on assessment of compensation. The

full and fair compensation is assessed by including all components of

land quality and the market value should be used as basis for valuation

of land and properties. Presently in assessing the value of the

unexhausted improvements for compensation purposes, the law

emphasizes that the value should be the price that which the said

improvements can fetch if sold in the open market. But this in normal

circumstances is lower than the replacement value but higher than the

initial construction cost of the said improvements. According to the

regulation, the valuation of the affected properties must be done by a

qualified and authorized Valuer.

The Land (Compensation Claims) Regulations, 2001

26 H


The regulations apply to all application or claims for compensation

against the government or Local authority or any public body or

Institution and they also cover compensation which may be claimed by

occupier.

The Land (Schemes Of Regularization) Regulation, 2001

Under the Land Act, 1999 Section 60(1) an area can be declared to be a

regularization area. Regularization of an area involves the following:

a) Arrangements for the survey, adjudication and recording of interests

in land claimed by those persons occupying land in the regularization

area.

b) Arrangements for the readjustment of boundaries of plots of land.

c) Better planning and layout of the land including pooling, sharing and

redistribution of rights in land.

d) Arrangements for the involvement of the local authorities having

jurisdiction in the regularization area in the implementation of the

scheme.

e) Arrangement for involvement of the people whose land is the subject

of the scheme of regularization in the implementation of the scheme.

f) Arrangement for the assessment and payment of any compensation

that may be payable in connection with the implementation of the

scheme.

Section 60(3) emphasizes that “For avoidance of doubt, no scheme or

regularization shall be implemented until occupation and use of land by

those persons living and working in the area have been recorded,

adjudicated, classified and registered.”

The Land Disputes Court Act. 2002 (Act No.2/2002)

This act provides the respective courts and their functions. Before

implementation of sub projects, any land conflicts existing in the areas

shall be resolved through the appropriate land courts to ensure that

harmony prevails in the intended undertaking. Project beneficiaries will

therefore be bound by these Acts.

The Land Use Planning Act, 2007 (Act No.6/2007)

The Act provides for the procedures for preparation, administration and

enforcement of land use plans; to repeal the National Land Use

Planning Commission and to provide for related matters. The Act has

distinctive authorities of land use planning in Tanzania laid down with

their functions and powers. The power vested to authorities which give

them teeth to bite is to enforce approved land use plans including

taking defaulters to court of law.


6666.0 Judicial context of the housing sector with respect to mortgages.0 Judicial context of the housing sector with respect to mortgages.0 Judicial context of the housing sector with respect to mortgages.0 Judicial context of the housing sector with respect to mortgages

The most important laws governing the mortgage market are Chapter X

of the Land Act, as amended in 2004, and the Mortgage Financing

(Special Provisions) Act No. 17 of 2008 (which is read in conjuction with

the Land Act which remains the principal act).

Civil Procedure

In Tanzania, all mortgage foreclosures of a family residence require

court intervention. Historically, in view of the inefficiencies and biases

of the legal system, this has prompted the widespread perception

among lending institutions that the legal and institutional framework

does not adequately allow for the creation and enforcement of

mortgages, especially bearing in mind that in the past, the law had

been heavily weighted in favour of the rights of the borrower. That

perception created by not having non-judicial foreclosure to obtain

possession of a mortgaged property, has been, along with other key

issues such as spousal consent, at the core of lending institutions

choosing to stay away from the mortgage market save those

institutions that were willing to take the risk. The perception however

was not necessarily unfounded, as there are known cases where lenders

experienced difficulties in their rights to obtain possession of and or to

sell a mortgaged property as a result of injuctions or court interventions

based on baseless extra-legal claims. However, in the wake of the

amendments to the Land Act, by way of the enactment of the Mortgage

Financing (Special Provision) Act, which has addressed some of the key

concerns for lenders, lending institutions are now positioning

themselves for market entry to what is largely a nascent mortgage

market with a substantial housing deficit in excess of three million

homes.

It should be noted that many knowledgeable people believe that there

is no such thing as foreclosure in Tanzania. While there was foreclosure

by power of sale in effect before the adoption of amendments to

Chapter X of the Land Act in 2004, Chapter X provides that court action

is necessary for foreclosure of a family home and, in Section 125,

states that “any rule of law, written or unwritten, entitling a mortgagee

to foreclose the equity of redemption in mortgage land is abolished.” In

fact, the law allows for foreclosure through repossession and/or sale of

the property. “Foreclosure” is simply the termination of the debtor’s

rights to pay what he owes, reinstate good standing under the loan, and

retain ownership of the property used to secure the loan, which ends

upon sale of the property to a third party. What Tanzania does not have

is "strict foreclosure," under which a court may deliver possession of a

property free of the debtor's right of redemption prior to execution sale,

or “non-judicial foreclosure.” (Rabenhorst & Butler, 2007)

It should be noted that the exclusion of family homes from non-judicial

foreclosure apparently was included in the law in an effort to protect

individual borrowers and their families from banks that might be over-

eager to take away their property. This is clearly an element adopted

from the socialist past of the country since experience around the world

shows that lenders examine the law to determine if execution

procedures are efficient and predictable when they are deciding

28 H


whether to enter the market. The availability of non-judicial foreclosure

thus results in a more competitive market. Ease of enforcement is also

a factor in determining credit risk, so that a strong system results in

lower interest rates, longer terms, lower down payments, and

willingness to lend to persons other than the wealthy. So an

enforcement system that requires long and expensive litigation before a

lender can get access to the collateral securing a bad loan results in a

smaller, less competitive market and less favorable terms for

borrowers. (Rabenhorst & Butler, 2007)

Court Jurisdictions

Overall, there is a need to establish what court actually holds

jurisdiction over mortgage-related claims. Under the procedural

provisions outlined in Chapter X of the Land (Amendment) Act 2004

which is further amended by way of the Mortgage Financing (Special

Provisions) Act 2008, it is states under Section 140 (1) that:-

“All proceedings instituted in court in relation to the exercise by the

mortgagee of powers to sell or enter in possession of the mortgaged

land shall be brought in accordance with the provisions of the Civil

Procedure Act,1966 and tried by way of summary proceedings”.

Subsequently thereafter, under subsection (2) it states “Notwithstanding

any other provisions of this Act an action for exercise of a power of sale

or for possession of a mortgaged property may be brought in the Land

Division of the High Court.”

It would appear, as in the case above, that there are parts of the

legislation that create an element of doubt over jurisdiction issues.

There are experts who believe, however, that the procedural provisions

of Chapter X are detailed enough to evidence the legislature’s intention

that mortgage enforcement would take place under Chapter X itself

rather than the Civil Procedure Act, and that the procedures in the Civil

Procedure Act are no longer in effect. Moreover, it is not clear whether

the summary procedures are in effect; in any case, they are often

ignored in practice (Rabenhorst & Butler, 2007). The spirit of the law

however, seems to move away from its previous past. Amendments

incorporated under the Mortgage Financing (Special Provisions) Act

seem to be trying to address principal matters that ensure that the

rights of both the mortgagor and the mortgagee are preserved.

Third Party Interests

Key changes have been implemented in the revised legislation

surrounding what was previously a major hurdle to the issuance of

mortgages in the market. Previously, although spousal consent was

required, one could easily, by non disclosure, especially where

polygamous marriage was the case, create the space for a spouse to

request for an injunction from the courts particularly where no initial

assent was provided by one spouse over the use of their matrimonial

home as collateral for a mortgage. In effect, the Act recognized the

rights of a spouse under the Law of Marriages Act, 1971 without

providing total clarity on whether say, as in the case of polygamous

marriages, spousal consent was required from all spouses. The law was

also silent on deemed marriages where a person may have been

cohabiting with a woman over a long enough duration to customarily be

regarded as husband and wife. Furthermore, the law also made it

difficult for the lender to verify and ascertain the truth especially where

a borrower deliberately hid the fact about having a spouse.

Under the Mortgage Finance (Special Provisions) Act, 2008, the law now

states under Section 114(2) that it shall be the responsibility of the


mortgagor to disclose whether they have a spouse or not and it shall be

the responsibility of a mortgagee to take reasonable steps to ascertain

whether the applicant for a mortgage has a spouse or spouses. As such

the law provides that on the strength of an affidavit or written and

witnessed document declaring as such, which also applies to any other

third party holding interest in the said property, the Mortgagee is

deemed to have taken all reasonable measures. Should the applicant

commit the offense of non-disclosure or knowing provide false

information to the mortgagee they are liable for a fine not less than 50

percent of the loan value or to imprisonment of not less than twelve

months.

Under the previous legislation, delaying tactics and unnecessary

appeals were prevalent and with the institution of the Mortgage Finance

(Special Provisions) Act No. 17, the strengthening of the creditor’s

ability to enforce collateral has been made possible. The provisions of

the Act now clearly stipulate that the only reasons for a court to throw

out a foreclosure claim are if (i) a mortgage loan was never taken, or (ii)

the loan has already been fully repaid.

It should be noted that the Act contains a consumer protection section

requiring clear disclosure of pre-contractual information such as interest

rate, early repayment penalties, and full disclosure of costs.

6.1 Judicial context of the housing sector with respect to land

The formal court system has a more adjudicatory approach and

includes district-level land courts, housing tribunals in urban areas, the

land divisions of the high courts and the courts of appeal. Regardless of

the tribunal, customary law will be applied to resolve disputes over land

held under a right of customary occupancy. In addition to the informal

and formal tribunals, the Commissioner of Lands can operate as an

independent adjudicator given that the Commissioner has authority to

commission an inquiry on land matters, conduct proceedings and reach

determinations. The proceedings do not require adherence to rules of

evidence, and the procedure is distrusted by many rural communities,

which prefer to find local solutions to conflicts (United States Agency for

International Development (USAID), 2010).

30 H


7777.0 .0 .0 .0 Banking and Financial System with reference to the housing sectorBanking and Financial System with reference to the housing sectorBanking and Financial System with reference to the housing sectorBanking and Financial System with reference to the housing sector

The financial sector in Tanzania has undergone substantial structural

change since the liberalization of the sector in 1991. The financial

landscape in Tanzania is comprised of mainly banks, pension funds,

insurance companies, and other financial intermediaries. However, the

sector is dominated by banking institutions which account for about 75

percent of the total assets of the financial system, followed by pension

funds whose assets account for about 21 percent while the insurance

sector and remaining financial intermediaries hold about 2 percent

each (Bank of Tanzania, 2010). Foreign owned banks in Tanzania

account for about 48 percent of the banking industry’s total assets.

Chart Chart Chart Chart 1111: Financial : Financial : Financial : Financial Sector AssetSector AssetSector AssetSector Asset----Based Composition Based Composition Based Composition Based Composition –––– June 2010June 2010June 2010June 2010

Source: Bank of Tanzania

Financial sector assets have expanded rapidly in the past decade from

a total of TZS 1,637 billion at end of December 2001 to TZS 15,376

billion in December 2010 (Serengeti Advisers Limited, 2011). More

considerably, the banking sector total assets have expanded 2.8 times

since 2006 precipitated by increased lending to the private sector with

loans expanding almost 3½ times over the same period to TZS 5.9

trillion from TZS 1.7 trillion. Equally investments in government

securities doubled from TZS 1.2 trillion in 2006 to 2.37 trillion in 2010

(Serengeti Advisers Limited, 2011). The results are a demonstration of

the efforts that the government has been taking to strengthen the

banking system to maintain financial sector stability. However, based

on the end-June 2009 banking sector review carried out by the BOT,

four banks fell below the capital adequacy ratio (CAR) threshold of 12

percent. Non-performing loans (NPLs) averaged 7.67 percent across the

Pension Funds21%

Insurance 2%

Microfinance Institutions

1%

Mutual Funds

1%Banks75%

Composition


banking sector, compared with 6.33 percent at the end-June 2008.

Fourteen banks had NPLs above the average, in part due to their

exposure to the agricultural sector, which has accumulated a NPL ratio

of almost 27 percent (Bank of Tanzania, 2010).

By end of June 2010, the banking sector was made up of 41 banking

institutions, out of which 19 were foreign owned. The banking system

showed a high concentration of total assets - 57 percent - being held by

four big banks, while 43 percent were accounted for by the remaining

37 banks. It should be noted that 3 of the four big banks are either

shareholders or have made applications to acquire equity in TMRC. This

to a measure may be indicative of their intended strategy to equally

dominate the mortgage market. Investment in TMRC is viewed to be

within the core objective of delivering banking services to the general

public, although it should be made clear that the existing banking laws

in Tanzania restrict banks from engaging in non-banking financial

services. Banks which intend to diversify into other financial services are

required to establish separate subsidiaries. As such, the separation of

banking services from other financial services provides some cushion

against the transmission of shocks across different sectors in the

financial system

Pension funds deposits in the top ten banks in Tanzania represented

about 10 percent of total private sector deposits in the banking system

as at end June 2010. Equally pension funds along with insurance

companies hold between 30 percent and 20 percent of the total

amount of outstanding government debt securities. Pension funds’

assets account for 21 percent of total assets of the financial system,

while the investment portfolios of these pension funds are concentrated

mainly in two areas, namely: government securities and in the illiquid

commercial real estate. This stance of investment poses substantial

threat to financial stability in the event government debt market

experiences a significant shock and/or the bust of the growing bubble in

the commercial real estate sector. As with banks, a similar trend of

asset concentration is also observed in pension funds. The three largest

pension funds hold about 85 percent of the sector’s total assets.

On the real estate front, some of the public pension funds have invested

directly in housing. In 2003, NSSF developed 194 houses in Kinyerezi,

Dar es Salaam and started the development of another 300 residential

houses in Mtoni Kijichi, Dar es Salaam. Recent low income housing

development projects27 include:

a) Housing project for the Tanzania Peoples Defense Forces (TPDF)

comprising accommodation for 242 families in Dar es Salaam and

Arusha

b) A similar residential project in Pemba, Unguja (Zanzibar) and Dar es

Salaam for the Tanzania Police Force Phase I comprising of 120

flats

c) Planned projects include Tanzania Police Force residential houses

Phase II – 120 flats

d) Affordable housing in Mtoni Kijichi area in Dar es Salaam.

Where construction is not directly to government, first priority is

normally given to its pensioners and where the uptake is slow the

general public is invited to purchase houses. Loans for houses are

normally structured for 15 year repayment terms. The Public Service

Pension Fund, starting this last year started an acquisition phase that

will see it acquire plots in Dar es Salaam and other regions. These plots

will be sold to members either through direct purchase agreements or

through guaranteed loans from Azania Bank, whose largest

27

(National Social Security Fund, 2007/08)

32 H


shareholders are the main pension funds. Loan deductions would be

spread over 5 years. Initially 200 houses are planned for Dar es Salaam

and 50 each for Morogoro, Mtwara, Shinyanga and Tabora regions.

Investment in low income housing is viewed as low risk as outright

purchase will be required and where loans are granted, there will be

substantial cash cover from pension savings accumulated by the

borrowing member; this cover will meet liabilities in the event of

default.

The Parastatal Pension Fund PPF also ventured into low cost housing

and in 2007 developed a project in Kiseke, Mwanza, comprising 580

houses. Members of the Fund bought 365 of these houses through

bidding. The remainder were reserved for the general public but the

uptake has been slower than expected primarily because the Fund

raised the selling prices to take into account higher construction and

carrying costs.

A study commissioned in 2006 by the Financial Services Deepening

Trust (FSDT) to review the scope of access to financial services in

Tanzania, under what is now known as the Finscope 2006 demand

survey, revealed that 54 percent of Tanzanians were excluded from any

kind of access to a financial service, be it formal, semi-formal, or

informal. Furthermore, it revealed that only 9 percent of Tanzanians

maintained an in a commercial bank or credit institution (formal

financial providers). Two percent to the adult population it was noted

were, at the time, served by Microfinance Institutions (MFIs) and

SACCOs (semiformal financial providers), and 3 percent were served

through informal groups such as Village Community Banks (VICOBA) as

well as family and friends). Together with those who have no access to

any financial services, 89 percent have no access to formal or

semiformal financial institutions. Commercial banks serve less than

10 percent of the population (or 1,382,000 people in an adult

population of 21 million)28 yet attract more than 50 percent of those

who take out a loan or choose to save (Bank of Tanzania, 2010).

SACCOs are their principal competitor, attracting almost 800,000

savers with MFIs and the Postal Bank trailing behind.

Overall, domestic lending to the building and construction industry has

been increasing year on year in shilling terms (see table 4) with lending

to the sector tripling since 2004. However, it has been registering a

declining as a percentage of gross domestic lending activity (see chart 2

below) in the wake to increased lending to the agricultural and

Table Table Table Table 4444: Domestic lending activity (in shilling terms): Domestic lending activity (in shilling terms): Domestic lending activity (in shilling terms): Domestic lending activity (in shilling terms)

2004 2005 2006 2007 2008 06/2009

Real Estate & Leasing

- - 54,443 50,028 88,352 95,082

Building & Construction

42,157 83,074 83,456 104,102 142,992 114,872

Data Source: Bank of Tanzania

Chart Chart Chart Chart 2222: Domestic lending activity to the Building & Construction : Domestic lending activity to the Building & Construction : Domestic lending activity to the Building & Construction : Domestic lending activity to the Building & Construction sectorsectorsectorsector as a percentage of gross domestic lending activityas a percentage of gross domestic lending activityas a percentage of gross domestic lending activityas a percentage of gross domestic lending activity

28

The latest Finscope report bullets highlights increased penetration with formal

financial institutions now servicing 12.4 percent which represents about two

million adults of the currently estimated at 20 million adult population.


Data Source: Bank of Tanzania

manufacturing sectors. Nevertheless, it is anticipated that this trend

will reverse as banks seek to enter into the mortgage market.

7.1 The mortgage market in Tanzania

It is estimated that mortgage loans outstanding currently amount to

around USD 100 million, split between around 2,000 loans, making for

the average loan size of around USD 50,000 (Hanai & Chambi, 2009).

However, this amount is growing relatively rapidly as new entrants come

into the market. Since independence in 1961, housing was approached

by Government with a policy that drove towards universal state

provision of housing in rural and urban areas. However, this proved

unaffordable, and the policy was changed in 1972 towards a slum

improvement program (Hanai & Chambi, 2009). The Government also

encouraged self-construction through the provision of land and

subsidized credit finance. It established the Tanzanian Housing Bank

(THB) in 1973 for this purpose. THB provided around 14,000 mortgages

until its demise in August 1995. Since the collapse of THB, there has

been no widespread provision of housing finance in Tanzania. Since the

beginning of the 1990s’, considerable effort has been expended

towards improving the financial services sector primarily through the

financial sector liberalization and reform program implemented

following the adoption of the Banking and Financial Institutions Act of

1991. The table below offers a comparison of Tanzania’s mortgage

market size relative to some other sub-Saharan African markets.

Table Table Table Table 5555: Mortgage Debt to GDP 2007: Mortgage Debt to GDP 2007: Mortgage Debt to GDP 2007: Mortgage Debt to GDP 2007

Mortgage Debt to GDPMortgage Debt to GDPMortgage Debt to GDPMortgage Debt to GDP $GDP/Head (2007)$GDP/Head (2007)$GDP/Head (2007)$GDP/Head (2007)

Tanzania 0.30% 392

Nigeria 0.50% 944

Uganda 1.00% 382

Senegal 2.00% 941

Ghana 3.90% 749

Namibia 20.00% 3,502

South Africa 34.00% 6,185

Source: World Bank

7.2 Key risks facing the Mortgage Market

7.2.1 Insufficient stock of housing qualifying for mortgages

Due to the historical past of the country having no mortgage facilities,

property development has been traditionally been conducted

individually and incrementally over periods stretching beyond five years

matched with commensurate salary earnings. To this end, the supply of

housing, particularly affordable housing, remain virtually non-existent.

In this regard however, immense opportunities exist in the housing

development space for the keen property developer.

Mitigant: Due to the same fact that housing has primarily been done

incrementally and in situ over many years, there is a large stock of

0.00%

1.00%

2.00%

3.00%

4.00%

5.00%

6.00%

7.00%

2004 2005 2006 2007 2008 06/2009

Domestic Lending - Building & Construction Sector

34 H


partially finished homes that are capable of providing the needed equity

for the development of a vibrant mortgage market. Furthermore, with

the revamping of the NHC towards making it a Master Developer with

full support from Government, one would expect that in the next few

years, a housing stock of good and affordable houses will begin to

emerge.

.

7.2.2 High Cost of Land Development

As a result of poor town planning, access to sizeable parcels of land for

development remains scarce. Where one would wish to leverage their

costs down with economies of scale, one would have to virtually seek a

large site in the peri-urban areas of a city or alternatively incur large

expenses in acquiring dilapidated properties within key strategic areas.

Given the inefficiencies within the local government of not being able to

deliver the needed infrastructure i.e. roads, water etc in a timely

manner, additional costs are incurred by developers in having to factor

in the development of sites, services and required infrastructure adds to

projects costs which they obviously pass on to their clients.

Mitigant: As mentioned earlier, the restructuring of NHC towards

making it a Master Developer, responsible for delivering larger parcels

of serviced land will ultimately create the economies of scale to make

housing affordable in light of the larger projects that will be carried out.

Ultimately, this ought to bring down the overall pricing of houses as well

as manage down the prohibitive cost of trunk infrastructure.

7.2.3 Underdeveloped Land and Housing Market

Tanzania lacks adequate serviced land and suffers from lack of capacity

and resources toward the development of a good housing market

Mitigant: Government with the restructuring of the NHC, the creation of

the TMRC, change of key legislation surrounding mortgages and the

planned sensitization of the general public towards the use of

mortgages is certainly showing the required spirit towards meeting its

housing deficit of in excess of three million units. The appointment of a

capable Lands Minister who understands the issues surrounding

housing and urban development is certainly helping the process as the

budget allocation for the NHC is set to rise tenfold in the coming fiscal

year. Tasked with the responsibility of delivering 15,000 units of new

housing by 2014, it is expected that the landscape will change

tremendously over the next few years.

7.2.4 High Cost of Construction

Construction materials and technology coupled with continuing

construction inflation is increasingly putting pressure on the unit cost of

built up space adversely affecting affordability. Elements such as value

added tax (VAT) on materials effectively is passed on the property

buyers creating an increased hike in prices

Mitigant: The passing of the Unit Titles Act, also referred to as the

Condominium law, will support the development of storied housing

creating higher density and more cost-effective configurations of

building and space configurations. Intense lobbying is being made for

the removal of VAT on building materials to catalyse development and

allow for affordability on new developments coming up.

7.2.5 Credit Risk

Given that mortgages are relatively new to both consumers and bankers

in Tanzania, there is a possibility of doubtful lending and questionable

products being delivered to the general public. Furthermore, with the

absence of a well established Credit Reference Bureau (see 8.4 below)


the exposure is amplified given that mortgages generally entail large

sums being lent out for longer term periods.

Mitigant: There is ongoing development of a regulatory framework that

is being led by the Bank of Tanzania and supported by the World Bank

to help manage this risk. Furthermore, with the creation of TMRC,

where equity of members is required, TMRC will carry its own credit

assessment of its member institutions while member institutions will

need to do proper assessment of all mortgage products and loans to

ensure that repayment is not comprised so as to maintain the integrity

and ensure the continued success of TMRC.

7.2.6 Lack of Construction Finance availability for Developers

Historically, banks withheld providing construction finance primarily as

a result of issues surrounding the prevailing mortgage legislation at the

time and the fact that there was no ready mortgage market to

guarantee the availability of offtakers on the demand side.

Mitigant: In the wake of revised legislation and efforts being carried out

by government to rally forward the housing market, the previous trend is

now reversing with financial institutions now beginning to scout for

reputable developers

Cost of Mortgages

Interest rates on mortgage loans is currently prohibitive hovering at 16 -

18 percent per annum (see table 6).

Mitigant: It is expected that with increased participation and innovation

from new entrants into the mortgage market, strengthened by the input

expected from TMRC, and new well built affordable housing is made

available, mortgage rates will begin to fall.

Table Table Table Table 6666: Breakdown of Mortgage Terms from Main Mortgage Lenders: Breakdown of Mortgage Terms from Main Mortgage Lenders: Breakdown of Mortgage Terms from Main Mortgage Lenders: Breakdown of Mortgage Terms from Main Mortgage Lenders

INTERESTINTERESTINTERESTINTEREST LOAN SIZELOAN SIZELOAN SIZELOAN SIZE DEPOSITDEPOSITDEPOSITDEPOSIT MAX. MAX. MAX. MAX. TENORTENORTENORTENOR

Institution TZS USD Min (mlns)

Max (mlns)

Percent Period (Years)

Azania Bank Limited

18% n/a selective selective 20% 15

Commercial Bank of Africa (CBA)

18% 9% 20 350 10% 20

Bank of Africa

17% 10% 40 n/a 20% 10

Source: (Moyo, 2011)

7.3 Tanzania Mortgage Refinancing Company

The Tanzania Mortgage Refinancing Company (TMRC), which is

currently under formulation, is intended to be a specialized single

purpose institution involved in the development and promotion of the

mortgage finance market with the specific remit of providing liquidity to

mortgage lenders and steering the increased development of the local

bond market. Spearheaded by a World Bank initiative, TMRC will have

majority of its shareholding held by Banking and financial institutions as

defined by the Banking and Financial Institution Act No. 5 of 2006.

Currently six banks namely National Microfinance Bank (NMB), CRDB

Bank, Tanzania Investment Bank (TIB), Exim Bank, Azania Bank and Dar

es Salaam Bank have acquired equity in TMRC. National Bank of

Commerce (NBC) has confirmed its intention to subscribe shares given

that there is no restriction on other banks or other eligible institutions

participating. Lending will be made strictly to member banks. It should

be noted that TMRC will not be a deposit taking institution but will

rather refinance eligible mortgage loans of mortgage originators and

fund by issuing simple corporate bonds in the local bond market. TMRC

36 H


is expected to start operations with a minimum capital of TZS 6 billion

to be provided by the founding shareholders. As the balance sheet of

TMRC grows, shareholders will be expected to raise its capital. TMRC

was founded by five shareholders with no single shareholder owning

more than 33 per cent of the equity, minimum equity subscription is

TZS 500m. The key benefits o f the TMRC are: (i) provision o f longer

term funds to the Tanzanian financial market; (ii) creation o f a lender o

f first resort function which allows deposit base to be better leveraged

without liquidity concerns; (iii) reduction in interest-rate and asset-

liability matching risks for the mortgage lenders; (iv) promotion o f

competition among market participants, by removing long-term funding

as barrier to entry; (v) enhancing affordability of mortgage for home-

owners by lengthening maturities and lowering funding costs; and (vi)

development of a deeper and more liquid private bond market (World

Bank 2010)

7.4 Credit Reference Bureau

There is presently no credit reference bureau in Tanzania although it is

anticipated that one will be operational by the end of the year.

However, banks have over the past five years, on the strength of the

Tanzania Bankers Association (TBA) appeal, been obtaining signed

authorization to disclose personal details in the event of default to the

Credit Reference Bureau as a pre-requisite for account opening. To this

end, TBA has been maintaining a register effectively creating a

database for defaulters. Banks have in the past shown reluctance to

share information due to issues surrounding breach of non-disclosure of

key client detail.

8888.0 The Real Estate Market in Tanzan.0 The Real Estate Market in Tanzan.0 The Real Estate Market in Tanzan.0 The Real Estate Market in Tanzaniaiaiaia

The present state of the real estate market leaves much to be desired.

With 70 percent of the urban population immersed in unplanned and

unserviced informal settlements, there lies immense opportunity for

growth especially bearing in mind that the government’s strategy is

geared towards upgrading. Affordable housing is in short supply. With

the current annual demand of 200,000 plots and a 3,000,000 housing

gap, Tanzania faces a huge hurdle but equally presents immense

opportunities for the prudent investor.

8.1 Housing Demand

The urban transition is well under way in mainland Tanzania. The urban

population increased from a low base of 5.7 percent to 22.6 percent

over the period 1967–2002, based on census data. The total housing

deficit was estimated at 2.2 million units in 2000. It has since escalated

to in excess of 3 million units. Between 1990 and 2001, the average

annual demand for plots in Dar es Salam was 20,000 units while the

average annual supply was under 700, leaving 97 percent of the

recorded demand unfulfilled. Since most Tanzanians construct their

own homes slowly over a number of years, the supply of land is crucial

to the production of shelter. At the national level, the annual demand

for formal land between 1991 and 2001 was 150,000 plots29, while the

supply averaged 8,000 surveyed plots annually, indicating an annual

shortfall of 95 percent.

8.2 Main actors and players in the Real Estate Market in Tanzania

The limited amount of housing construction is largely done by the public

sector either through the National Housing Cooperation (NHC), the

Tanzania Building Agency (TBA), which caters specifically to the

29 Now estimated at 200,000 plots


government employee market or through the parastatal pension and

social security institutions. The private or “organized” developer/ builder

market is virtually absent in Tanzania and there is no professional real

estate developer associations. The little private development which

does occur tends to be luxury developments aimed at the wealthy,

expatriates or the Diaspora. Reasons given for lack of real estate

developers are (i) lack of access to finance (ii) lack of technical and

managerial capacity in real estate development sector and (iii) the high

cost of using imported materials and (iv) the lack of provision of basic

services and infrastructure by local authorities. Developers are then

forced to develop their own solutions, which inevitably raise the price of

houses significantly.

Table Table Table Table 7777: Key actors in the development of shelter in T: Key actors in the development of shelter in T: Key actors in the development of shelter in T: Key actors in the development of shelter in Tanzaniaanzaniaanzaniaanzania

ActorsActorsActorsActors ContributionContributionContributionContribution

1 Individual Unsurveyed Dwellings 70.0%

2 Individual Surveyed Dwellings 13.5%

3 National Housing Corporation 5.1%

4 Real Estate Developers 3.9%

5 Central Government 3.0%

6 Pension Institutions 2.4%

7 Local Government 2.1%

Source: (Nnunduma, 2009)

8.3 Availability of Serviced Land

With few and limited housing options in the formal sector, the vast

majority of the population, as mentioned earlier, reside in informal

settlements where the typical form of tenure is rental. Despite the

government’s efforts to try and create additional plots as in the case of

the 20,000 Plots project30, there has been slow growth, contrary to what

was anticipated, due to inaccessibility of housing finance and the fact

that the plots were totally green fields without the needed infrastructure

of services to make it all work.

8.4 Building and Construction

Only 15 percent of households in Tanzania have electricity, with a very

large disparity between urban and rural households in Mainland

Tanzania (45 percent and 3 percent, respectively)- see table 6 below.

Two in three households in Tanzania (67 percent) live in dwellings with

floors made of earth, sand, or dung. The next most common type of

flooring material is cement, accounting for 30 percent of households.

Most urban households in Mainland Tanzania have floors made of

cement (71 percent), while in rural areas the main flooring materials

are earth, sand, or dung (84 percent) – See table 7.

Table Table Table Table 8888: Household Characteristics : Household Characteristics : Household Characteristics : Household Characteristics ---- ElectricityElectricityElectricityElectricity

HOUSEHOLD CHARACTERISTICSHOUSEHOLD CHARACTERISTICSHOUSEHOLD CHARACTERISTICSHOUSEHOLD CHARACTERISTICS

Households Population

Mainland Mainland

Urban Rural Total Urban Rural Total

Electricity

Yes 45.4 3.4 14.2 45.4 3.0 13.2

No 54.5 96.6 85.7 54.4 97.0 86.7

Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Tanzania Demographics and Household Survey 2010

Good-quality walls ensure that household members are protected from

harsh weather conditions and, therefore, exposure to hazardous factors.

30 The 20,000 plots project was geared to create additional plots in the direct peri-urban areas of Dar es Salaam where large parcels of undeveloped land was surveyed and subdivided and sold to individuals for the purpose of housing construction.

38 H


There are three main types of materials used to construct walls in

Tanzania: sun-dried bricks (28 percent), poles and mud (27 percent),

and baked bricks (23 percent). Cement blocks are mainly used in the

urban areas of Mainland and Zanzibar (47 percent and 48 percent,

respectively) – See table 8. Overall, six in ten households use iron

sheets for roofing material. The remaining households mainly use grass,

thatch, or mud. In Mainland Tanzania, almost nine in ten urban

households use iron sheets, while in rural areas half of households use

grass, thatch, or mud and the other half use iron sheets (National

Bureau of Statistics, 2011).

Table Table Table Table 9999: Distribution of households by construction materials : Distribution of households by construction materials : Distribution of households by construction materials : Distribution of households by construction materials –––– Flooring Flooring Flooring Flooring MaterialsMaterialsMaterialsMaterials

DISTRIBUTION OF HOUSEHOLDS BY CONSTRUCTION MATERIALSDISTRIBUTION OF HOUSEHOLDS BY CONSTRUCTION MATERIALSDISTRIBUTION OF HOUSEHOLDS BY CONSTRUCTION MATERIALSDISTRIBUTION OF HOUSEHOLDS BY CONSTRUCTION MATERIALS


Mainland Mainland


Flooring MaterialFlooring MaterialFlooring MaterialFlooring Material

Earth, sand, dung 23.1 83.9 68.2 24.3 84.2 69.7

Cement 70.7 15.2 29.5 69.4 14.9 28.1

Other 6.1 0.8 2.2 6.3 0.9 2.1

Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Tanzania Demographics and Household Survey 2010

Depending on the strategy for entry into the Tanzanian market, one

would estimate costs to run in the region of USD400-USD600 for a

lower income house, USD600 – 800 (medium income) and 800+ for a

high end development.

Table Table Table Table 10101010: Distribution of households by construction materials : Distribution of households by construction materials : Distribution of households by construction materials : Distribution of households by construction materials –––– Main Main Main Main

wall and main roof materialswall and main roof materialswall and main roof materialswall and main roof materials

DISTRIBUTION OF HOUSEHOLDS BY CONSTRUCTION MATERIALS


Mainland Mainland


Main Wall MaterialMain Wall MaterialMain Wall MaterialMain Wall Material

Grass 0.1 0.8 0.6 0.1 0.7 0.6

Poles and Mud 7.8 32.7 26.3 7.9 31.0 26.1

Sun-dried Bricks 20.1 31.9 28.8 20.8 34.5 30.3

Baked Bricks 23.2 24.3 24.0 24.2 24.4 24.1

Wood, Timber 0.2 1.9 1.5 0.2 1.8 1.5

Cement Blocks 46.7 3.8 14.8 44.8 3.3 13.6

Stones 1.2 0.2 0.5 1.2 0.1 0.5

Other 0.7 4.4 3.5 0.8 4.1 3.4

Total 100.0 100.0 100.0 100.0 100.0 100.0

Main Roof Main Roof Main Roof Main Roof MaterialMaterialMaterialMaterial

Grass/thatch/mud 6.5 49.0 38.1 7.4 48.7 38.9

Iron sheets 88.0 50.5 60.1 86.2 50.7 59.3

Tiles 1.8 0.2 0.6 1.9 0.2 0.6

Concrete 2.8 - 0.7 3.2 - 0.7

Asbestos 0.8 0.2 0.4 1.3 0.2 0.4

Other - 0.1 0.1 - 0.1 0.1

Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Tanzania Demographic and Health Survey 2010

8.5 Efficiency of Property Rights and Registration

There are a total of nine procedures that are required to register

property in Tanzania that on average take 73 days before title is

provided (see appendix 2). On the other hand, it would take 328 days to

obtain a construction permit (see appendix 3)


8.6 Rental Market

Tanzania enjoys pro-landlord legislation. Rents can be freely negotiated

and are normally paid either bi-annually or annually.31 Very rarely will

one be charged on a monthly basis although the government is now

seeking to outlaw annual house rent outright (James, 2010). However,

it is actually illegal to receive annual rent in advance, but due to the

current housing crises, government has found it difficult to regulate.

Rentals were previously regulated by The Rent Restriction Act 1984

which was heavily pro-tenant but has now been repealed. Rents are

now controlled through the The Courts (Land Disputes Settlements) Act,

2002 which allows landlords to recover arrears, among other things,

and outlines due process for evicting tenants32. It should be noted that

more than 80 percent of residents in urban areas are tenants (UN

HABITAT, 2010)

Table Table Table Table 11111111: Duration of Eviction Process for non: Duration of Eviction Process for non: Duration of Eviction Process for non: Duration of Eviction Process for non----payment of rentpayment of rentpayment of rentpayment of rent

EVICTION FOR NONEVICTION FOR NONEVICTION FOR NONEVICTION FOR NON----PAYMENT OF RENTPAYMENT OF RENTPAYMENT OF RENTPAYMENT OF RENT

Duration until completion of service of process 7

Duration of trial 180

Duration of enforcement 30

Total Days to Evict Tenant 217

Source: Global Property Guide

31 Real Estate Agents normally receive a commission equal to one month’s rent 32

In theory, however, to evict a tenant who has caused a breach or failed to pay rent, the landlord must get the approval of the Ward Tribunal. If the tenant does not comply with the orders of the Ward Tribunal, the case is elevated to the District Land and Housing Tribunal for enforcement, and then to the High Court and Court of Appeals For recovery of possessions worth TZS (Tanzanian Shilling) 50 million (US$42,914) or more and compensation for arrears worth TZS40,000,000 or more (US$34,331), claimants can file the case directly to the High Court (Land Division) (Pro Landlord Landlord and Tenant Laws, 2011)

8.7 Taxation Regime

Main taxes levied on property:-

Table Table Table Table 12121212: S: S: S: Snapshot snapshot snapshot snapshot summary of tax payable on land or propertyummary of tax payable on land or propertyummary of tax payable on land or propertyummary of tax payable on land or property

TaxTaxTaxTax AmountAmountAmountAmount

Land Rent Tax 11.5% – 12.5% on economic

value of the land

Lease Agreements 1% of gross rent being stamp

duty

Conveyance 1% of gross rent being stamp

duty

Withholding tax (rent) 15% of rental income. Can be

credited against tax payer’s

income tax liability

Corporate Tax 30%

Capital Gains 20%

Property Tax TZS 15,000 – TZS 75,000.

Payment based on size, use

location of the property


9999.0 .0 .0 .0 Rationale for Shelter Afrique Involvement in TanzaniaRationale for Shelter Afrique Involvement in TanzaniaRationale for Shelter Afrique Involvement in TanzaniaRationale for Shelter Afrique Involvement in Tanzania

• Tanzania has taken the effort to make amendments to what

was previously doubtful mortgage legislation. The improved

legislation as a result of the passing of the Mortgage Finance

(Special Provisions) Act No. 17 of 2008 and the Unit Titles Act

No. 16 of 2008 sets the stage for serious housing

development opportunities in very near future.

• Given its experience in construction finance in different

markets, Shelter Afrique would have an upper hand in

structuring deals and bringing them through to fruition.

• The market is ripe for construction finance particularly where

the development of ‘affordable’ residential housing is

concerned.

• Upon entry, Shelter Afrique should concentrate on the USD

50,000 – USD 150,000 market which has been totally ignored

in the past yet has the highest potential for growth given that

the bulk of local working professionals fall within that price

banding and are presently not having their needs met

accordingly.

• Shelter Afrique would be in a position to use a blend of

financing that could entail the use of co-financing, joint

venture or direct lending to support housing development.

• New legislation requiring Pension funds to place their funds

with a custodian or trustee financial institution so as to

concentrate on pension services delivery would play well into

Shelter’s flexibility and guarantee a steady pipeline flow from

Pension organizations seeking to develop properties for their

pensioners.

• Shelter Afrique enjoys strong brand recognition that it can

leverage in this market

• The development of TMRC, which aims to be a catalyst in

bringing about a mortgage market should create further

liquidity in the market place which ought to translate to

increased construction of housing and provide for more

borrowers in the market place.

Appendix 1 Distribution of Household by Construction Materials

DISTRIBUTION OF HOUSEHOLDS BY CONSTRUCTION MATERIALS


Mainland Mainland


Flooring MaterialFlooring MaterialFlooring MaterialFlooring Material Earth, sand, dung 23.1 83.9 68.2 24.3 84.2 69.7

Cement 70.7 15.2 29.5 69.4 14.9 28.1

Other 6.1 0.8 2.2 6.3 0.9 2.1

Total 100.0 100.0 100.0 100.0 100.0 100.0

Main Wall MaterialMain Wall MaterialMain Wall MaterialMain Wall Material

Grass 0.1 0.8 0.6 0.1 0.7 0.6

Poles and Mud 7.8 32.7 26.3 7.9 31.0 26.1

Sun-dried Bricks 20.1 31.9 28.8 20.8 34.5 30.3

Baked Bricks 23.2 24.3 24.0 24.2 24.4 24.1

Wood, Timber 0.2 1.9 1.5 0.2 1.8 1.5

Cement Blocks 46.7 3.8 14.8 44.8 3.3 13.6

Stones 1.2 0.2 0.5 1.2 0.1 0.5

Other 0.7 4.4 3.5 0.8 4.1 3.4

Total 100.0 100.0 100.0 100.0 100.0 100.0 Main Roof MaterialMain Roof MaterialMain Roof MaterialMain Roof Material

Grass/thatch/mud 6.5 49.0 38.1 7.4 48.7 38.9

Iron sheets 88.0 50.5 60.1 86.2 50.7 59.3

Tiles 1.8 0.2 0.6 1.9 0.2 0.6

Concrete 2.8 - 0.7 3.2 - 0.7

Asbestos 0.8 0.2 0.4 1.3 0.2 0.4

Other - 0.1 0.1 - 0.1 0.1

Total 100.0 100.0 100.0 100.0 100.0 100.0

Source: Tanzania Demographic and Health Survey 2010Source: Tanzania Demographic and Health Survey 2010Source: Tanzania Demographic and Health Survey 2010Source: Tanzania Demographic and Health Survey 2010


Appendix 2: Procedure for Registering Property

Procedure Time to Complete Associated Costs

1. Obtain an official search at the Land registry 14 days33 TZS 2,000 - 4000

2. Obtain clearance by the Land Ministry of payment

of land tax for ten years 1 day34 No cost

3. Obtain a property tax clearance from the

Municipality for the last 10 years 1 day35 No cost

4. Obtain a valuation report 2 days36 (Property Value – 200,000)*(1.25/1000)+550+valuation approval

fee of 0.01% of property value

5. A government valuer inspects the property to

determine its value 7 days Already paid in Procedure 5

6. Notarization and execution of sale agreement and

preparation of title deed 1 day37 Approximately 3% of property value

7. Obtain approval for the transfer 14-21 days TZS 5000

8. Obtain a capital gain tax certificate from the

Tanzania Revenue Authority 14-21 days No Cost

9. The transfer deed is delivered to the Land Officer

for its recording under the name of the buyer at the

Lands Registry

14 days 1% of property value (stamp duty)+ Registration Fee as follows:

(Property value – 100,00)*(2.5/1000)+1000

Source: World Bank – Doing Business

33 Simultaneous with procedure 2,3 and 4 34 Simultaneous with procedure 1,3 and 4 35 Simultaneous with procedure 1,2 and 4 36 Simultaneous with procedure 6 37 Simultaneous with procedure 4

44 H


Appendix 3: Dealing with Construction Permits

Procedure Time to Complete Associated Costs

1. Obtain location plan from City Council, Ministry of Lands 7 days TZS 5,000

2. Obtain certified copy of the land rent receipts from the Internal Revenue Authority 7 days No charge

3. Obtain Geological Survey 20 days TZS 8,000,000

4. Obtain Building Permit 180 days TZS 300,000

5. Request and receive pre-construction inspection from the City Council Officers 14 days No charge

6. Request and receive excavation work inspection from City Council Officers 1 day No charge

7. Request and receive foundations work inspection from the City Council Officers 1 day No charge

8. Request and receive concrete works from the City Council Officers 1 day No charge

9. Request and receive slabs work inspection from City Council Officers 1 day No charge

10. Request and receive roof work inspection from the City Council Officers 1 day No charge

11. Request and receive inspection from the fire department once construction is completed 1 day No charge

12. Obtain approval of the building from the fire department upon completion 14 days No charge

13. Receive inspection from the health department 1 day No charge

14.Obtain approval of the building from the health department upon completion 14 days No charge

15.Apply for occupancy permit from the City Council and request final inspection 1 day No charge

16.Receive final inspection from the City Council Officers 1 day No charge

17. Obtain Occupancy Permit 14 days No charge

18. Apply for electricity connection 1 day No charge

19. Receive electricity connection from Tanesco 1 day No charge

20.Obtain electricity connection from Tanesco 60 days TZS 10,000,000

21. Obtain water and sewerage connection from Urban Water Authority 30 days No charge

22. Obtain telephone connection 3 days TZS 60,000 Source: World Bank - Doing Business

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