Chinhoyi — Nascent mortgage lender, National Building Society (NBS), will push ahead with its plans to tap into the lower end of the housing market by rolling out an ambitious nationwide housing scheme despite the low levels of financial inclusion and incomes in the country.
NBS, which is owned by the National Social Security Authority (NSSA), was licensed in April 2016 and opened its first branch in May the same year.
"We provide affordable low cost housing through the provision of mortgage finance to first time home owners primarily for high and medium density developments. Our primary target market is the low to middle income earners as well as individuals in the informal sector," NBS managing director, Ken Chitando, said.
High interest rates on loans are a huge deterrent for Zimbabweans, the majority of whom are building houses using channels in the informal system.
NBS's interest rates are at between 9,5 percent for home owners who want mortgages in the high density areas and 11,5 percent per annum for medium density.
These rates are more competitive than those currently prevailing in the market ranging between 15 percent and 18 percent.
Economist Prosper Chitambara said mortgage rates are too high in Zimbabwe.
"The challenge in the country has to do with the cost of obtaining mortgages. Most low income earners will not be able to pay back because the interest rates are still on the high side," said Chitambara.
Chitambara does not see the rates coming down anytime soon.
"There is no liquidity and if they can come down I am not sure they can come down significantly enough to have an impact," he said.
NBS is currently working on projects in areas such as Bindura, Ruwa, Shurugwi, Gweru and Masvingo. It is in the process of finalising the necessary modalities for a housing project that will see 700 units completed in what will be the initial phase for Batanai township in Chinhoyi.
The piece of land in Chinhoyi has a capacity for 2 500 housing units.
Government's economic blueprint, the Zimbabwe Agenda for Sustainable Socio-Economic Transformation (Zim-Asset), says NSSA has the mandate to deliver affordable housing for over 1,2 million people on the waiting list.
With government desperate to show achievements made under Zim-Asset, NBS is trying to cover a lot of ground in a short space of time with the 2018 elections looming. Provision of stands and housing is part of the ruling ZANU-PF party's campaign strategy particularly in urban areas.
NBS wants to develop 100 000 units worth US$1,5 billion over the next five years. Official figures say the country's housing waiting list is at 1, 25 million.
The building society plans to float a series of bonds as it tries to raise US$150 million for the construction of 10 000 housing units this year.
Economist Kipson Gundani believes that by targeting low income earners, NBS is simply responding to the dictates of the market.
"The majority of us can be classified as low income earners including civil servants who are the majority of those employed. So these people are being responsive to the needs on the market where people don't have money but are in need of houses. So the only thing you can do is to offer a product that they can afford. They are being rational, they are being realistic," said Gundani.
Observers note that the bulk of the housing deficit is in the lower end of the market and believe that people can translate part of their rental commitments into loan commitments. NBS's stands range from 100 square metres to 300 square metres at between US$10 500 and US$38 190.
"People can open a basic account with a deposit of US$5. We want to encourage a spirit of saving because when you save you demonstrate your capacity to be able to make regular payments month on month and a track record which helps when applying for a loan," said the building society. NBS also offers personal loans at an interest rate of 15 percent per annum on a reducing balance basis for a period ranging from six months to five years.
The Movable Property Security Interest Bill, recently brought before lawmakers by Finance and Economic Development Minister, Patrick Chinamasa, seeks to make it easier for the informal sector to access funding from banks by using assets such as livestock and vehicles to secure loans from banks.