PROPERTY developer, Shelter Zimbabwe’s managing director Chester Mhende wants financial institutions to think long term and not restrict their lending to resuscitate the disbursement of mortgage loans.
This comes as the real estate sector is facing a myriad challenges, key among them a dead mortgage and equity market as well as an increase in divestures, among others.
Thus, workers are finding it increasingly difficult to access loans to purchase or build properties.
Speaking at the inaugural Capital Markets Conference in Nyanga last week, Mhende said the mortgage market in Zimbabwe was now almost non-existent.
He added that the national housing guarantee and the national housing fund that used to support mortgages was also now defunct.
Mhende said mortgages that typically are 20 to 25-year loans had been turned to a maximum of three to five years in response to the volatile macroeconomic environment.
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“The portion of mortgages as a percentage of total assets held by even building societies has significantly dropped, where there are still building societies, an otherwise extinct sector,” he said.
“There is a need for financial institutions to think long term and not restrict their lending to government policy. Issuing mortgages will have positive ripple effects and even more revenue for industry from valuation fees, insurance etc. There is need to revive building societies and the market must plan beyond 2030 if we are to survive.”
Mhende said resources for real estate were being tied up, thus locking up capital that had the potential to grow the economy at a time when lenders were asking for more than just title when refinancing houses.
“The loan-to-value ratio of 50% is making the refinancing unattractive, (with) very high interest rates for over-collateralised borrowing. According to the latest Monetary Policy Statement by RBZ [Reserve Bank of Zimbabwe], the average loan to deposit ratio in the banking sector is 49,27%. Financial institutions might want to lend out more,” he said.
“The few financial institutions which are offering mortgage facilities might need to relax their terms to accommodate the market and at the same time cover their risk. Exploring various instruments like reverse mortgages, home equity loans are possible solutions.”
Mhende added that the sector could leverage on housing to promote savings.
He, however, bemoaned the fact that the country had faced currency challenges for a long time, including the loss of value for savings and pensions as well as lack of public trust in the financial services sector.
“There is also high informalisation rate, 64,1% according to the Zimbabwe National Chamber of Commerce. However, real estate is now a savings vehicle and storing value as a result of currency volatility,” Mhende said.
“To promote savings, there is need to deploy some of the pension contributions and surplus resources towards such products to preserve value as well as entice the investor community to participate in real estate development.”