Lenders urged to tailor mortgages, target informall employed

HARARE - Zimbabwe's mortgage lenders must be innovative and tailor terms targeted at the informally employed in order to harness new opportunities for property market growth, AfriAsia Zimbabwe Holdings Limited (AZHL) limited said.

In its weekly report published on Tuesday, the financial group — formerly Kingdom Financial Holdings Limited — said “there is need for investors, financiers and developers to understand that the market is ripe for innovation that will respond to the needs and capacities of the majority”.

This comes as the informal sector has become the major employer and driver of Zimbabwe’s productive sector as the country’s economy stutters.

Recently, the Bankers Association of Zimbabwe (Baz) commissioned a study to ascertain the amount of cash circulating outside the formal system, which is estimated to be as much as $7,4 billion.

Zimbabwe’s mortgage industry is currently depressed with most home-seekers failing to afford. The country’s major mortgage lenders include CBZ Bank, CABS, FBC Building Society and ZB.

“In the housing sector, this is about engaging with the reality of affordability and delivering to the market,” AZHL said.

“The fact that more economic activities are now happening in the informal sector makes the traditional ways of advancing mortgage facilities to the formally employed miss opportunities to provide low-cost and affordable housing units which are able meet the requirements of the market,” said the report.

Zimbabwe’s housing backlog currently stands at an estimated 1,3 million.

It is expected to increase on the back of surging rural-to-urban migration. In his 2014 National Budget, Finance minister Patrick Chinamasa said government would be gazetting the necessary instrument to extend the tax exemption on mortgage finance to all financial institutions providing the facility.

Analysts say the measure is likely to increase the pool of funds available for mortgage financing hence promoting the mortgages market and property development.

At the moment, housing units on mortgage are taking close to two years without firm offers, an indication that the general populace is excluded on the property market despite demand for affordable low-cost residential properties, according to AZHL.

“The demand for residential property remains high in Zimbabwe, though the appetite has been hampered by low disposable incomes and the deterioration in liquidity conditions,” AZHL said.

“More expensive properties are taking much longer to sell and have witnessed price stagnation, therefore there is need to capture a share of the money circulating in the informal sector through fair-priced residential properties,” it said.

The financial group said there is growing evidence that low-income population is a ripe market where housing supply is dominated by incremental development by self-construction and informal entrepreneurs.

The services of housing development agencies are often developed in ways which better serve the middle class than the low income population segment.

According to a study by the Centre for Affordable Housing Finance in Africa (2013), Africa is growing through its cities and the demand for housing is growing.

Currently, about 40 percent of the continent’s one billion people live in cities and towns, and it is estimated that in the next few years, some African cities will be home to as much as 85 percent of their country’s population, and the residential opportunity is obvious.

“If the mortgage markets continue only serving the minority, investors will continue to miss the market if they do not consider the realities of affordability and design their products accordingly.

“The opportunity lies further down the income pyramid, where the bulk of the population lives.

“This generally feared but less understood bottom of the pyramid can be served profitably with appropriate innovative intervention financing models,” AZHL’s report indicated.

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