Appropriate mortgage loans needed to grow real estate: WestProp
WESTPROP Holdings Limited says local banks and the Government should work on mechanisms to drive the provision of mortgage facilities and provision of “formal funding” channels to grow the property sector.
Sentiments by the property development firm come on the back of a ballooning informal economy, whose liquidity continues to circulate unaccounted for yet it is the biggest segment of the local economy.
WestProp says mechanisms should continue to be put in place to have more formal funding of productive sectors of the economy including the real estate sector.
A mortgage, which is a loan provided by a financial institution to buy or build a property, is one of the most popular ways to purchase a property the world over.
Various types of mortgages are available in Zimbabwe, including ordinary mortgages, US dollar mortgages, equity releases, and employer-assisted mortgages.
According to the Reserve Bank of Zimbabwe (RBZ) monetary policy statement, mortgages constituted just 5,58 percent of total loan distribution in 2023.
The majority of Zimbabweans, despite the huge demand for residential accommodation, cannot afford most of the housing schemes offered either by housing developers or housing projects the banks themselves would have funded.
The situation is even worse for individuals who are not formally employed. Either, interested home seekers cannot afford or qualify for available schemes due to low income or it is because none of the housing schemes are tailored for informal sector workers who are deemed not credit worthy.
Speaking on the sidelines of an analyst briefing a fortnight ago, WestProp chief executive officer, Ken Sharpe, said local banks were unable to give out mortgages given that they were inundated with short-term funds.
He said more effort should be directed at establishing access to the international market mortgage-backed securities.
“The current problem in the banking sector is that all the money that has been put into the local banking sector is not long-term deposits, it is short-term money.
“So, banks are restricted from lending it out on a long-term basis because they cannot afford a run on the bank where depositors come and say I want my money back and they do not have the money to pay out. Money in the informal economy is very difficult to tap into.
“So, the only answer to the long-term solution of this economy is to say, how do we introduce more mortgages and more formal money in the system? When those two things are solved, the economy will balloon.
“It will be a phenomenal growth to take us to US$150 million to 250 billion dollars (GDP), which is possible in the next five to 10 years, which is also the vision of the President (Mnangagwa) of an upper-middle-income economy. But it requires the Government and all stakeholders, including the private sector,” said Mr Sharpe.
Banks have moved to be major players in the provision of funding for the construction of housing properties around the country, but their offerings are encountering limited uptake owing to the exorbitant charges or interest on the mortgages.
Mr Sharpe implored the local financial sector to be active and to tap into the huge mortgage market in the country.
He said the central bank recently increased the statutory reserve from 15 to 20 percent and extracted US$100 million from the banks’ liquidity. Mr Sharpe pleaded with the apex bank to lend back the funds at concessionary rates to the commercial banks for on-lending to customers.
“My message to the governor and the Minister of Finance is please, can we have access to some of those funds as the real estate sector, as the manufacturing sector, because we know we are productive?
“We are not going to put those funds into consumption, we are putting them into permanent infrastructure that develops the country and creates value. And when we do that, the economy grows,” stated Mr Sharpe.
WestProp Holdings Limited chairman, Michael Louis, said the company had a pipeline of projects that would change the face of the local real estate sector.
“As chairman, I believe that we cannot take WestProp to where we want it to go alone. I think the questions about raising capital are so real, we are not going to be able to raise capital the conventional way, that is to get a bond. We have to have creative thinking of the best minds on how to raise funds,” said Louis.
He said WestProp would continue building relationships that steer company performance ahead.
Recently, WestProp formalised a public-private partnership with the City of Harare on the development of the Hills project, which the chairman alluded to “could not be done alone without the City of Harare”.
herald
