LOCAL authorities are reportedly pressuring banks involved in land development and housing finance to fund the renovation of existing infrastructure before undertaking new projects in their jurisdictions, businessdigest can reveal.
This, according to the banks, is negatively impacting their bottom line.
Zimbabwe has been on a property development frenzy with a number of investors coming in to have a slice of the cake as the government targets one million housing units by 2025. The investors include banks developing housing projects.
However, deliberations at the just-ended smart cities and devolution master class 2024 organised by Global Renaissance Investments in Nyanga show that some of the houses end up with no takers because of the steep selling prices that are being charged.
Bankers attending the master class disclosed that the demand by local authorities increased their costs, which are passed on to buyers.
“For local authorities, the bulk infrastructure, the sewer treatment plants, the water treatment plants, have exceeded their carrying capacity,” one banker said.
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“As housing financiers and housing developers come into play, local authorities actually give us directives that if you are to provide a certain number of stands, let's say we need to provide up to 1 000 housing stands, we have to upgrade the existing infrastructure at all costs.
“But the downside of that now is, as housing financiers, it will then increase our costs, which we will have to naturally push into the beneficiary, and that will eat into the bottom line.
“It means we will have a beautiful product that meets the standard, but it will not have takers because it is not financially sustainable.”
The banker said there was a need for modalities that incentivise housing developers, particularly in the provision of offsite infrastructure, to make sure that they provide good quality residential housing units without compromising the costs.
Another banker indicated that a number of housing financiers were in the process of acquiring land, but the acrimonious relationship between neighbouring urban councils and rural councils were also taking a toll on them.
“In particular urban councils, they will then argue that we cannot give our services to rural councils because when a developer purchases urban land that is under a rural council, they argue that the other rural district councils will get all of the development related fees up until the plan approvals,” the banker said.
“But once the development is done and has been given compliance, they will then hand it over to the neighbouring urban council.
“But now the problem that then comes up is the urban councils, some of them will actually be a bit reluctant to now connect in the services, citing that they have exceeded the carrying capacity.”
Real estate expert Alexander Millin told businessdigest that housing finance in Zimbabwe was absolutely critical.
“We cannot expect mortgage funding to be the burden of the government alone. The private sector needs to play an active role in the provision of mortgage funding,” he said.
"Now this may be through pension funds, insurance companies, and even what we may call employer-assisted mortgages for employers to give their employees some funding to be able to get a roof over their heads." he said.
“This is a major problem. It’s been a major problem for quite a while now. And I also feel that a think-tank system should be created where professionals and stakeholders have an endeavour to discuss the lack of mortgage funding in Zimbabwe,” Millin said.
He added that without mortgage funding, there could be no real estate development.