Prepared By:
MAP OF TANZANIA
Cover Page Details
Aerial Photograph of Kariakoo
www.greatmirror.com
Source: CIA World Factbook
Table of Contents
HOUSING STUDY - TANZANIA ................................................................................ 2
1.0 CONTEXT ANALYSIS........................................................................................ 3
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............................................................................................. 7
1.8 CAPITAL MARKETS .............................................................................................. 8
2.0 SITUATIONAL ANALYSIS OF HOUSING IN TANZANIA ....................................... 9
3.0 INSTITUTIONAL AND POLITICAL CONTEXT OF HOUSING IN TANZANIA ......... 11
3.1 INSTITUTIONAL ORGANIZATIONS .......................................................................... 11
3.2 NATIONAL HOUSING CORPORATION ..................................................................... 11
3.3 HOUSING POLICY .............................................................................................. 11
4.0 LEGAL AND REGULATORY FRAMEWORK ON LAND ...................................... 13
7.0 BANKING AND FINANCIAL SYSTEM WITH REFERENCE TO THE HOUSING
SECTOR ...............................................................................................................29
7.1 THE MORTGAGE MARKET IN TANZANIA.................................................................. 32
7.3 TANZANIA MORTGAGE REFINANCING COMPANY..................................................... 34
7.4 CREDIT REFERENCE BUREAU.............................................................................. 35
8.0 THE REAL ESTATE MARKET IN TANZANIA .....................................................35
8.1 HOUSING DEMAND ........................................................................................... 35
8.2 MAIN ACTORS AND PLAYERS IN THE REAL ESTATE MARKET IN TANZANIA ................... 35
SOURCE: TANZANIA DEMOGRAPHIC AND HEALTH SURVEY 2010 .................................. 37
8.7 TAXATION REGIME ........................................................................................39
9.0 RATIONALE FOR SHELTER AFRIQUE INVOLVEMENT IN TANZANIA ................40
APPENDIX 1 DISTRIBUTION OF HOUSEHOLD BY CONSTRUCTION MATERIALS ................... 41
APPENDIX 2: PROCEDURE FOR REGISTERING PROPERTY .............................................. 42
APPENDIX 3: DEALING WITH CONSTRUCTION PERMITS ................................................ 43
BIBLIOGRAPHY....................................................................................................44
4.1 LEGAL ENVIRONMENT GOVERNING LAND ............................................................. 14
4.2 LAND DELIVERY MECHANISMS ........................................................................... 16
4.3 PLOT SIZE AND DISTRIBUTION OF LAND ............................................................... 17
4.5 OWNERSHIP OF LAND ........................................................................................ 19
4.6 FORCED ACQUISITION OF LAND BY THE GOVERNMENT ............................................ 19
4.7 WOMEN’S RIGHTS TO LAND ............................................................................... 20
4.8 FOREIGN OWNERSHIP OF LAND .......................................................................... 20
4.9 PRIMARY CONSTRAINTS TO THE DEVELOPMENT OF A FORMAL LAND MARKET ............ 21
6.0 JUDICIAL CONTEXT OF THE HOUSING SECTOR WITH RESPECT TO
MORTGAGES ...................................................................................................... 26
6.1 JUDICIAL CONTEXT OF THE HOUSING SECTOR WITH RESPECT TO LAND .... 28
1
Housing Study - Tanzania
5.0 LEGAL ENVIRONMENT GOVERNING HOUSING ............................................. 22
Housing Study - Tanzania
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.
2
Housing Study - Tanzania
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!
1.0 Context Analysis
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 Law Reform
Commission is responsible for the review of the country’s laws.3 The
1
(Public Administration, 2011)
As a passing note, a commercial court was established in September 1999 as a division
of the High Court.
3 Based on English Common Law
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.
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
2
3
4
Article 114, Constitution of United Republic of Tanzania, 1977
Housing Study - Tanzania
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.
Regional Map of Tanzania
Source: http://mapsof.net/tanzania/static-maps/png/regions-of-tanzania
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Housing Study - Tanzania
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).
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
5
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 tourism,
(CIA, 2011)
(CIA, 2011)
7 IMF (2009);
8 IMF (2009)
9 Financial Sector Deepening Trust (2007) Finscope E-book Tanzania
5
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Housing Study - 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).
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.
backdrop of strong real GDP growth and expansion of credit growth to
the private sector. Nevertheless, the country is currently
Figure 1: Tanzania GDP Growth 1998 - 2010
14
12
10
8
6
4
2
0
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009
GDP Growth
Inflation
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 done against a
Culminated to 13.5 percent at the end of 2008 from an average 5.8 percent from
2003-07
10
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
6
Housing Study - Tanzania
SOURCE: IMF WORLD ECONOMIC OUTLOOK DATABASE, OCTOBER 2010
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 employing a
substantial portion of the balance. Historical recorded trends show the
increase of graduates from Higher Learning Institutions (HLI) rising from
11
7
(CIA, 2011)
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 selfemployment.
Table 1: 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 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.
Housing Study - Tanzania
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.
1.8 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.
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.
Overall, portfolio inflows remain fairly negligible despite government’s
move to establish the stock exchange to foreign investors. With a lack of
(The Dar es Salaam Stock Exchange, 2010)
(The Dar es Salaam Stock Exchange, 2010)
14 (The Dar es Salaam Stock Exchange, 2010)
12
13
8
Housing Study - Tanzania
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.
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 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
9
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 Zanzibar 15.
15
www.oikocredit.org
Housing Study - Tanzania
2.0 Situationa l Analysis 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.
Typical Semi-Modern Swahili House (UN HABITAT, 2010)
16
(HABITAT, 2007)
10
Housing Study - Tanzania
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
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.
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
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
17
19
18
11
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
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.
(Background: Ministry of Lands, Housing and Human Settlements Development)
(The Ministry of Lands, Housing and Human Settlements Development, 2007)
20
(Luhwago, 2010)
(Ministry of Lands, 2007)
Housing Study - Tanzania
3.0 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 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
Table 2: 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
Ministry of Lands, Housing and Human Settlements
Development
Presently
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.
12
Housing Study - Tanzania
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.
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
13
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.
21
(United States Agency for International Development (USAID), 2010)
Housing Study - Tanzania
4.0 Legal and Regulatory Framework on Land
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 postindependence 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.
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
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 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
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Housing Study - Tanzania
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.
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)
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/subvillage chairpersons, a Village Chairperson, and a hired Village Executive
T able 3: Land Use in Tanzania
Land use
Forest Reserves
15
Million ha
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 subvillage 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
Housing Study - Tanzania
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.
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 coregister. 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.
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Housing Study - Tanzania
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.
Granted right of occupancy
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. 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.
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
4.3 Plot Size and Distribution of Land
The existing standards for urban residential plots at 400-800m2, 8011,200m2 and above 1,201m2 for high, medium and low density plots
respectively have also created challenges in overall planning standards.
Figure 2: Existing Land Tenure Systems in Tanzania
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.
Existing Tenure
Systems
Statutory
Granted Right
of Occupancy
Occupancy
under Letter of
Offer
Customary
Derivative Right
Customary
QuasiCustomary
Informal
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.
17
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
Housing Study - Tanzania
Source: (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 nonhazardous 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.
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
22
23
Government of Tanzania 1999, Village Land Act No. 5
(United States Agency for International Development (USAID), 2010; Sundet, 2005)
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Housing Study - Tanzania
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
(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)
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
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
Inscription on house wall stating “Hapauzwi, ogopa matapeli” which in English
reads, “Not for sale, Beware of conmen”24
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 Acquis ition of Land by the Government
24
19
to
Photograph from www.greatmirror.com
Housing Study - Tanzania
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.
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 (onefourth 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
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
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Housing Study - Tanzania
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 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)
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)
The Constitution and formal law provide for equal rights to property and
prohibits discrimination on the basis of sex.25
4.9 Primary Constra ints to the Development of a Formal
Land Market
25
21
Photograph from www.greatmirror.com
Housing Study - Tanzania
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
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.
5.0 Legal 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.
26
Photograph from www.greatmirror.com
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
22
Housing Study - Tanzania
New commercial development in a Dar es Salaam suburb. 26
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 the
housing situation in Tanzania albeit in parity with this prevailing policy.
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
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
23
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,
Housing Study - Tanzania
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 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
24
Housing Study - Tanzania
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.
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
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:
25
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
Housing Study - Tanzania
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.
6.0 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
26
Housing Study - Tanzania
teeth to bite is to enforce approved land use plans including taking
defaulters to court of law.
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 overeager 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 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)
27
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.
Housing Study - Tanzania
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)
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).
28
Housing Study - Tanzania
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.
7.0 Banking 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 1: Financial Sector Asset-Based Composition – June 2010
Composition
Insurance
2%
Pension
Funds
21%
Source: Bank of Tanzania
29
Microfinance
Institutions
1%
Housing Study - Tanzania
Banks
75%
Mutual
Funds
1%
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
27
(National Social Security Fund, 2007/08)
30
Housing Study - 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
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).
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 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
31
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 (semi- formal
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 4: Domestic lending activity (in shilling terms)
2004
2005
Real Estate &
Leasing
Building &
42,157
83,074
Construction
Data Source: Bank of Tanzania
28
2006
2007
2008
06/2009
54,443
50,028
88,352
95,082
83,456
104,102
142,992
114,872
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.
Housing Study - Tanzania
c) Planned projects include Tanzania Police Force residential houses
Phase II – 120 flats
d) Affordable housing in Mtoni Kijichi area in Dar es Salaam.
3.00%
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.
2.00%
Table 5: Mortgage Debt to GDP 2007
1.00%
Tanzania
Nigeria
Uganda
Senegal
Ghana
Namibia
South Africa
Source: World Bank
7.2 Key risks facing the Mortgage Market
Domestic Lending - Building & Construction Sector
7.00%
6.00%
5.00%
4.00%
0.00%
2004
2005
2006
2007
2008
06/2009
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
Mortgage Debt to GDP
0.30%
0.50%
1.00%
2.00%
3.90%
20.00%
34.00%
$GDP/Head (2007)
392
944
382
941
749
3,502
6,185
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.
32
Housing Study - Tanzania
Chart 2: Domestic lending activity to the Building & Construction sector
as a percentage of gross domestic lending activity
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
33
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)
Housing Study - Tanzania
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
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.
the exposure is amplified given that mortgages generally entail large
sums being lent out for longer term periods.
Table 6: Breakdown of Mortgage Terms from Main Mortgage Lenders
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.
Institution
TZS
USD
Azania Bank
Limited
18%
Commercial
Bank of
Africa (CBA)
Bank of
Africa
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.
LOAN SIZE
DEPOSIT
MAX.
TENOR
Max
(mlns)
selective
Percent
n/a
Min
(mlns)
selective
20%
Period
(Years)
15
18%
9%
20
350
10%
20
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 is expected to
34
Housing Study - Tanzania
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.
INTEREST
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.
8.0 The Real Estate Market in Tanzania
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
government employee market or through the parastatal pension and
29
35
Now estimated at 200,000 plots
Housing Study - Tanzania
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)
Table 7: Key actors in the development of shelter in T anzania
Actors
Contribution
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 8: Household Characteristics - Electricity
HOUSEHOLD CHARACTERISTICS
Households
Mainland
Urban
Rural
Total
Urban
Population
Mainland
Rural
Electricity
Yes
45.4
3.4
14.2
45.4
3.0
No
54.5
96.6
85.7
54.4
97.0
Total
100.0
100.0
100.0
100.0
100.0
Source: Tanzania Demographics and Household Survey 2010
Total
13.2
86.7
100.0
Good-quality walls ensure that household members are protected from
harsh weather conditions and, therefore, exposure to hazardous factors.
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.
30
36
Housing Study - Tanzania
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 9: Distribution of households by construction materials –
Flooring Materials
DISTRIBUTION OF HOUSEHOLDS BY CONSTRUCTION MATERIALS
Households
Mainland
Urban
Rural
Total
Population
Mainland
Urban
Rural
Flooring Material
Earth, sand, dung
23.1
83.9
68.2
24.3
84.2
Cement
70.7
15.2
29.5
69.4
14.9
Other
6.1
0.8
2.2
6.3
0.9
Total
100.0
100.0 100.0
100.0
100.0
Source: Tanzania Demographics and Household Survey 2010
Total
69.7
28.1
2.1
100.0
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.
37
Table 10: Distribution of households by construction materials – Main
wall and main roof materials
DISTRIBUTION OF HOUSEHOLDS BY CONSTRUCTION MATERIALS
Households
Mainland
Urban
Rural
Total
Population
Mainland
Urban
Rural
Main Wall Material
Grass
0.1
0.8
0.6
0.1
Poles and Mud
7.8
32.7
26.3
7.9
Sun-dried Bricks
20.1
31.9
28.8
20.8
Baked Bricks
23.2
24.3
24.0
24.2
Wood, Timber
0.2
1.9
1.5
0.2
Cement Blocks
46.7
3.8
14.8
44.8
Stones
1.2
0.2
0.5
1.2
Other
0.7
4.4
3.5
0.8
Total
100.0
100.0 100.0
100.0
Main Roof Material
Grass/thatch/mud
6.5
49.0
38.1
7.4
Iron sheets
88.0
50.5
60.1
86.2
Tiles
1.8
0.2
0.6
1.9
Concrete
2.8
0.7
3.2
Asbestos
0.8
0.2
0.4
1.3
Other
0.1
0.1
Total
100.0
100.0 100.0
100.0
Source: Tanzania Demographic and Health Survey 2010
Total
0.7
31.0
34.5
24.4
1.8
3.3
0.1
4.1
100.0
0.6
26.1
30.3
24.1
1.5
13.6
0.5
3.4
100.0
48.7
50.7
0.2
0.2
0.1
100.0
38.9
59.3
0.6
0.7
0.4
0.1
100.0
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)
Housing Study - Tanzania
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).
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 11: Duration of Eviction Process for non-payment of rent
EVICTION FOR NON-PAYMENT OF RENT
Duration until completion of service of process
Duration of trial
Duration of enforcement
Total Days to Evict Tenant
7
180
30
217
Source: Global Property Guide
31
Real Estate Agents normally receive a commission equal to one month’s rent
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)
38
Housing Study - Tanzania
32
8.7 Taxation Regime
Main taxes levied on property:Table 12: Snapshot summary of tax payable on land or property
Tax
Land Rent Tax
Lease Agreements
Conveyance
Withholding tax (rent)
Corporate Tax
Capital Gains
Property Tax
Amount
11.5% – 12.5% on economic
value of the land
1% of gross rent being stamp
duty
1% of gross rent being stamp
duty
15% of rental income. Can be
credited against tax payer’s
income tax liability
30%
20%
TZS 15,000 – TZS 75,000.
Payment based on size, use
location of the property

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.
40
Housing Study - Tanzania
9.0 Rationale 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
Appendix 1 Distribution of Household by Construction Materials
DISTRIBUTION OF HOUSEHOLDS BY CONSTRUCTION MATERIALS
Households
Population
Mainland
Mainland
Urban
Rural
Total
Urban
Rural
Flooring Material
Earth, sand, dung
23.1
83.9
68.2
24.3
84.2
Cement
70.7
15.2
29.5
69.4
14.9
Other
6.1
0.8
2.2
6.3
0.9
Total
100.0
100.0
100.0
100.0
100.0
69.7
28.1
2.1
100.0
Main Wall Material
Grass
Poles and Mud
Sun-dried Bricks
Baked Bricks
Wood, Timber
Cement Blocks
Stones
Other
Total
0.1
7.8
20.1
23.2
0.2
46.7
1.2
0.7
100.0
0.8
32.7
31.9
24.3
1.9
3.8
0.2
4.4
100.0
0.6
26.3
28.8
24.0
1.5
14.8
0.5
3.5
100.0
0.1
7.9
20.8
24.2
0.2
44.8
1.2
0.8
100.0
0.7
31.0
34.5
24.4
1.8
3.3
0.1
4.1
100.0
0.6
26.1
30.3
24.1
1.5
13.6
0.5
3.4
100.0
Main Roof Material
Grass/thatch/mud
Iron sheets
Tiles
Concrete
Asbestos
Other
Total
6.5
88.0
1.8
2.8
0.8
100.0
49.0
50.5
0.2
0.2
0.1
100.0
38.1
60.1
0.6
0.7
0.4
0.1
100.0
7.4
86.2
1.9
3.2
1.3
100.0
48.7
50.7
0.2
0.2
0.1
100.0
38.9
59.3
0.6
0.7
0.4
0.1
100.0
Source: Tanzania Demographic and Health Survey 2010
Total
Time to Complete
Associated Costs
1. Obtain an official search at the Land registry
2. Obtain clearance by the Land Ministry of payment
of land tax for ten years
3. Obtain a property tax clearance from the
Municipality for the last 10 years
14 days33
TZS 2,000 - 4000
1 day34
No cost
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
7 days
Already paid in Procedure 5
1 day37
Approximately 3% of property value
14-21 days
TZS 5000
14-21 days
No Cost
14 days
1% of property value (stamp duty)+ Registration Fee as follows:
(Property value – 100,00)*(2.5/1000)+1000
5. A government valuer inspects the property to
determine its value
6. Notarization and execution of sale agreement and
preparation of title deed
7. Obtain approval for the transfer
8. Obtain a capital gain tax certificate from the
Tanzania Revenue Authority
9. The transfer deed is delivered to the Land Officer
for its recording under the name of the buyer at the
Lands Registry
Source: World Bank – Doing Business
Simultaneous with procedure 2,3 and 4
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
33
34
42
Housing Study - Tanzania
Appendix 2: Procedure for Registering Property
Procedure
Appendix 3: Dealing with Construction Permits
Procedure
1. Obtain location plan from City Council, Ministry of Lands
2. Obtain certified copy of the land rent receipts from the Internal Revenue Authority
3. Obtain Geological Survey
4. Obtain Building Permit
5. Request and receive pre-construction inspection from the City Council Officers
6. Request and receive excavation work inspection from City Council Officers
7. Request and receive foundations work inspection from the City Council Officers
8. Request and receive concrete works from the City Council Officers
9. Request and receive slabs work inspection from City Council Officers
10. Request and receive roof work inspection from the City Council Officers
11. Request and receive inspection from the fire department once construction is completed
12. Obtain approval of the building from the fire department upon completion
13. Receive inspection from the health department
14.Obtain approval of the building from the health department upon completion
15.Apply for occupancy permit from the City Council and request final inspection
16.Receive final inspection from the City Council Officers
17. Obtain Occupancy Permit
18. Apply for electricity connection
19. Receive electricity connection from Tanesco
20.Obtain electricity connection from Tanesco
21. Obtain water and sewerage connection from Urban Water Authority
22. Obtain telephone connection
Time to Complete
7 days
7 days
20 days
180 days
14 days
1 day
1 day
1 day
1 day
1 day
1 day
14 days
1 day
14 days
1 day
1 day
14 days
1 day
1 day
60 days
30 days
3 days
Associated Costs
TZS 5,000
No charge
TZS 8,000,000
TZS 300,000
No charge
No charge
No charge
No charge
No charge
No charge
No charge
No charge
No charge
No charge
No charge
No charge
No charge
No charge
No charge
TZS 10,000,000
No charge
TZS 60,000
43
Housing Study - Tanzania
Source: World Bank - Doing Business
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