THE Bankers Association of Zimbabwe (BAZ) said this week housing financiers were shelving large-scale projects due to high development costs, which are primarily related to off-site infrastructure.
This adds to concern expressed by bankers recently regarding local governments pressuring property developers to pay for excess infrastructural capacity at their own expense, which is negatively affecting their bottom lines.
This publication understands that the challenges constraining housing developers were not only limited to the infrastructural space, but also limited supply of strategic, affordable and land of vacant possession.
“The infrastructure gaps, coupled with increased demand for services due to a growing urban population against financial incapacity of local authorities, are compelling the local authorities to give directives to land developers to provide additional infrastructure facilities or upgrade the existing infrastructure at their own costs,” BAZ president Lawrence Nyazema told businessdigest.
“Due to high development costs whose main component is offsite infrastructure, private developers have shelved high impact large-scale projects, which have huge potential to reduce the housing backlog with significance.
“Viability of such projects compromises pricing and uptake of the properties by homeowners and investors alike.
Keep Reading
- Directors’ governance plan gets Central Bank nod
- Directors’ governance plan gets Central Bank nod
- Zimdollar shortage hits the country
- BAZ, govt in fresh talks over bank charges
“The City of Bulawayo has been grappling with bulk water supply challenges for years and this has seen developers stalling their projects because of the high cost of bulk water supply.”
The BAZ president said there is a need for a collective approach in lobbying for, and reviewing, upgrading and alignment of policies and procedure manuals to international best practice to improve on turnaround times in service delivery.
He noted that local authorities’ continued invoicing for rates or land taxes to developers during the development phase added to the already high costs of servicing, as well as, applying endowment rights to projects.
“It is noteworthy that upon completion, the projects are handed over to councils who then collect rates from the individual beneficiaries and from the developer for any unsold and vacant properties,” Nyazema said.
He said access to correctly priced lines of credit, both internal and external, with favourable tenures, was also a challenge.
Nyazema said there was a need for market certainty and policy consistency to improve access to medium and long-term financing tools and mechanisms.
Zimbabwe is battling to upgrade colonial infrastructure at a time there was an influx of rural to urban migration.
There has, however, been few upgrades, mainly funded by independent entities or international aid organisations, such as the African Development Bank’s US$1 million water project upgrade in Dangamvura’s Area 3 and Gimbonki in Mutare.
Nyazema said a few other rehabilitation, upgrade and expansion initiatives by local authorities were being funded through grants, twinning arrangements and special arrangements with other countries but they had not made much impact.
An example is the US$144 million Harare Morton Jaffrey water works rehabilitation project, which has received only half of the disbursement. The banks, according to Nyazema, are now involved in the end-to-end processes of housing delivery, which has seen more housing developments being availed to the market.
In prior years, building societies would mainly fund construction on pieces of land serviced by local authorities. They would also purchase existing or built properties.
Nyazema said the expanded functionality of banks often created friction with land developers, who view banks as big brothers exploiting the value chain and squeezing them out.
“Development finance becomes expensive as developers are now financing the value chain, not to mention the high cost of pre-development approvals, such as, development permits, design approvals for water and sewer reticulation, roads and storm water drainage, inspection fees and not forgetting the endowment fees,” he said.
Nyazema stressed that there was great scope for banks and housing financiers to turn around the infrastructure landscape in Zimbabwe despite the directives from the local authorities.
“Measures such as tax incentives, strategic partnerships, prescribed asset status and a sustainable municipal bond market have been tried, tested and adopted in jurisdictions beyond the continent, such as the Americas and Western European nations,” he said. “It only calls for a robust practical ecosystem structure to be in place to ensure that adequate and affordable off site infrastructure is delivered.”