By FINNIGAN WA SIMBEYE, 26th December 2011 @ 12:00, Total Comments: 0, Hits: 3570
HIKED interest rates in the country’s mortgage financing which have raised complaints among low income Tanzanians have nothing to do with World Bank conditions prior to lending the government 40 million US dollars (approx 60bn/-) last year to support establishment of a housing finance scheme.
The Bank’s Communication Officer in Dar es Salaam, Nicodemus Odhiambo, said the hiked interest rate which have come under fire from consumers are a sovereign issue which can better be addressed by the government.
“Interest rate policy in Tanzania is a sovereign matter, with monetary policy determined by the Bank of Tanzania and is clearly out of the control of the World Bank,” Mr Odhiambo wrote in an electronic mail while responding to ‘Daily News’ questions.
Mr Odhiambo said the Bank’s concessional loan is meant to help the country develop a housing finance scheme, establish a micro housing finance scheme targeting low income people and establish Tanzania Mortgage Refinance Company.
But the project appraisal document dated February 10, 2010, the Bretton Wood institution clearly stated that commercial banks should be allowed to charge interest rates on loans which are prevailing in the market which many National Housing Corporation tenants accuse of favouring the rich to access such mortgage financing.
“The housing sector is chaotic and full of sharks demanding hefty house rent and selling houses at hiked prices which can only be afforded by a few upper class people and foreigners,” charged Ilala flats tenant, Adam Batengas who is also a member of a 30-man committee formed by Dar es Salaam NHC tenants to follow up on President Kikwete’s directive that houses be sold to existing tenants.
Mr Batengas said NHC is now entrusted in the hands of a few greedy directors and managers who are exploiting a weakened legal framework to serve interest of a few greedy people while denying the majority a basic constitutional right to own a decent home.
“There are some people who want the government to be engaged in profitable business in an area which is sensitive to the majority poor, it’s very dangerous,” Batengas said while warning that if NHC board of directors and management refuse to comply with Mr Kikwete’s directive, then angry tenants who have nothing much to do but resist any forceful eviction and rent hiking.
In the World Bank appraisal, it stated: “The credit will support the initial, startup phase of the TMRC’s operations as a second-tier, wholesale, and market-based liquidity facility focused on refinancing longer-term residential mortgage loans originated by mortgage lenders.”
The TMRC which has since gone into business this year, was formed by commercial banks which subscribe capital as part of the World Bank and Tanzania government deal. The banks have since entered into an agreement with NHC to give mortgage loans to clients who will be buying houses constructed by the state owned housing company which has over 16,000 units countrywide.
NHC and its consortium of banks shocked consumers when they announced their partnership over two months ago and declared that low income earners can get 25m/- loans to buy NHC houses through mortgaging facility provided by the seven banks.
At between 15 and 19 per cent interest rate over a period of 15 years, consumers will repay a
whopping between 60m/- and 75m/-. “This is not for the poor certainly, it’s big business for big people out there who want to get us out NHC houses,” said Mujengi Gwao, Chairman of Ilala NHC tenants committee formed in 2007 to contest over 200 per cent rent hike by the corporation.
At Ubungo flats on the outskirts of the city, angry residents pulled down a corrugated iron sheet fencing at a site of new residential flats construction which NHC management said will be on sale at 67m/- per apartment saying with such hiked prices many of them will lose their tenancy rights.
But NHC management assured them of their right to stay but with Rent Restriction Act and amendment of NHC Act which gives the corporation a mandate to operate commercially against its initial establishment purpose of enabling majority impoverished Tanzanians access decent houses.
But TMRC Chief Executive Officer, Rished Bade has assured the public that with mortgage financing arrangement, interest rates will go down soon. “We want to bring into mortgage financing more banks so that interest rates can go down as there will be competition,” Mr Bade pointed out.
Bade said TMRC will get the money from Bank of Tanzania which is a conduit for the World Bank loan aimed at establishing long term housing finance market in the country. TMRC is a private company established by eight commercial banks with an objective of supporting mortgage lending by refinancing their mortgage portfolios.
It started operations earlier this year with a minimum capital of 6bn/- paid by founding shareholders at minimum equity capital of 500m/- each. The eight TMRC member banks are CRDB Plc, Azania Bank, Tanzania Investment Bank, Exim Bank, National Microfinance Bank, Dar es Salaam Community Bank, NIC Bank and Bank ABC. National Bank of Commerce is also planning to join the company.
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