2009-11-14 10:10:00 BoT gets Sh53 billion to ease housing shortage By The Citizen Reporter THE CITIZEN The Bank of Tanzania (BoT) has secured a $40 million (Sh52.8 billion) loan from the World Bank for the establishment of a Housing Finance Project (HFP) to help ease the housing shortage, especially in the urban centres. The government's initiative is rooted in the belief that enabling access to housing finance will help improve affordability and building standards, and also encourage the private sector to play a greater role in the provision of housing. The project, according to the BoT, includes the development of mortgage and housing-microfinance instruments in an effort to cater for different categories of would-be homeowners. The Resettlement Policy Framework (RFP), which was posted on the BoT�s website on Thursday, indicates that the loan has been secured through the International Development Association (IDA) credit. According to the BoT, the main objective of the project is to expand access to affordable housing finance for the purchase, construction or upgrading of residential houses. The objective will be achieved through the creation of a mortgage liquidity facility (direct funding) amounting to $30 million (Sh36.9 billion), to be managed initially by the BoT, and later by the Tanzania Mortgage Refinance Company (TMRC). The loan will also be used to set up a Housing Micro-Finance Fund (HMFF), with an initial capital of $3 million (Sh3.9 billion). The remaining $7 million (Sh9.2 billion) will finance a programme of technical assistance and capacity building, which will address issues in the supply of housing, the mortgage market and housing micro-finance. "TMRC will provide housing finance mortgage loans to financial institutions, while HMFF will provide housing microfinance loans to credit institutions - in both cases for providing housing loans to developers/investors in the house construction sector," notes BoT, in its online document. HFP will be implemented through a number of government agencies, financial institutions and private developers, all coordinated by and accountable to BOT. Even as the current impetus in the home financing initiative comes from both the private sector and the government, long term financing for housing remains scarce at present, in part because lenders do not have access to reliable sources of long term financing. But experts in the field argue that improving access to housing finance will help improve affordability and construction standards, and encourage the private sector to take a greater role in the provision of housing. Tanzania, like other African countries, suffers from a severe shortage of good quality housing, which has been growing every year. It is compounded by the lack of long-term housing finance, the absence of a formal residential housing construction sector, difficulties with land rights and rapid population growth and urbanisation. The passing of the Mortgage Finance (Special Provisions) Act, 2008 has created a lot of momentum in government for the development of housing finance, and hence the current efforts to establish the HFP. In addition, the enactment of Unit Titles Act, No 17 of 2008, has significantly improved the prospects for mass housing construction and the demand for mortgages. The BoT had engaged two consultants, Ms Saada Juma and Mr Bashiru Abdul, to draw up the Resettlement Policy Framework, which will be used as one of guidelines in the rollout of mortgage its financing schemes. According to the consultants, the policy has been formulated to reflect principles contained in the World Bank Operational Policies. On the other hand, the policy document will be used in conjunction with Tanzania�s national laws and the regulations guiding compensation and resettlement. "In cases where the WB policy and the Tanzanian laws are not in full accord, the higher standard and more stringent of the two will prevail as it satisfies the requirements of the lesser standards," says the policy. According to BoT, preparation of the framework on mortgage financing, was one of the requirements by the World Bank to be fulfilled by the government before the loan for the proposed HFP was approved. The frameworks provide broad principles and directives to guide the implementation of the project by agencies and developers. Though the RPF document covers Tanzania Mainland only, the resultant Bank Resettlement Policy will also guide any related resettlement projects in Zanzibar as well. According to the resettlement policy, a developer will deliver compensation to affected people following entitlements and procedures that take full consideration of public participation, formal and informal notification as well as documentation. "The taking of land and civil works will be effected only after compensation has been paid. HFP will be the source of funds for resettlement related costs," says BoT. The policy stresses that consultations with, and participation of the displaced people in planning, implementation, and monitoring will be ongoing throughout the process of preparing projects with local government system being main channel of activities. For a long time , housing finance was provided by Tanzania Housing Bank until it collapsed in 1993, due to a high default rate. Since its collapse, the country has been struggling to establish a new housing finance facility for the provision of loans to house buyers and developers. Currently, the purchasers have to dig deep into their pockets to finance their houses. Due to lack of mortgage facilities, Tanzanians prefer to acquire plots and construct their houses with the idea of purchasing completed units being not common. Currently, the National Social Security Fund (NSSF) and Parastatal Pension Fund (PPF) are the major organizations that construct and sell finished houses, by mostly targeting their members only.