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Dar’s Rent Nightmare

Why the city is overtaking Nairobi, Johannesburg and Kampala? , Tanzania runs a housing deficit estimated at 3 million units valued at $180 billion; The current annual demand for houses in urban areas is 200,000 units

Minister for Land and Human settlements Development, Prof Anna Tibaijuka

Living and doing business in Dar es Salaam, the country’s commercial capital, is becoming ‘a nightmare’ because of the escalating rents for both human shelter and business, The Guardian on Sunday can reveal today.

According to a random survey conducted in elite suburbs, among both middle and low-income earners, Dar es Salaam is more expensive than Nairobi and Johannesburg, thanks to the shortage of housing which currently stands at a mere three million units.

According to verified data from the National Housing Corporation(NHC), Tanzania runs a housing deficit estimated at 3 million units valued at $180 billion by the end of 2007, while the current annual demand for houses in urban areas is 200,000 units estimated to cost $12 billion. The deficit it was expected to grow by 15 percent by the end of last year due to high migration of people from rural to urban areas.

But perhaps the most striking fact is that only one percent ($50million) of the total loans issued by the banks in Tanzania is set aside for financing homes, putting many future home owners at the crossroads.

For instance, monthly rates for a two-bedroom fully furnished apartment located at elite suburbs like Masaki, Mikocheni and Oyster Bay range between $2000 and $4000, while the same cost an average of $2500 in Nairobi. In Kampala the same cost an average of $2200 while in Kigali it costs an average of $1800.

For a family house with three bedrooms located in Dar’s posh suburbs, it costs between $3000 and $4000, payable in one year period or six months to those tenants who are lucky. The same would cost an average of $2700 per month in Nairobi, and in Kampala an average of $2500, according to data gathered by the Guardian on Sunday.

Interviewed by The Guardian on Sunday, Knight Frank (T) property Manager Hamisi Hussein said the high class apartments are hired at between $2,000 and $ 8,000 per month depending on the location and quality of a house.

He says that Mikocheni, Upanga, Masaki and Oyster Bay neighbourhoods are the leading prime areas in the city of Dar es Salaam whose renting rates are higher than any other areas and their rental charges on apartments range between $ 3,500 and $ 8,000 per month.

Other areas under which his company operates is at Kijitonyama, Kinondoni and Mbezi Africana on the outskirts of the city. In these areas an apartment is hired at between $ 1,500 and $ 3,000 depending on its location and quality.

In Nairobi, fully furnished premium apartment costs a maximum of $5000 a month, while in Kampala the same would go for $4500 and in Kigali it would trade at $4000.

In Nairobi and Johannesburg rents are paid monthly, and the maximum period a tenant could be asked to pay his rent up front is three months contrary to Dar es Salaam where landlords demand a whole year’s rent.

In terms of office and commercial space, though, there has been a mushrooming of skyscrapers in Dar es Salaam, Mwanza and Arusha, but the rent charged by landlords has grown by 25 percent during the past three years.

According to data gathered from a global Real Estate company, Knight Frank(T)Ltd, office space in the considered high-grade area stands at $21 per square metre, while in the low-grade areas, the cost stands at $16 per square metre.

But, there are those posh buildings sitting on highly developed suburbs, where the cost per square metres stands at $38, according to the survey conducted by The Guardian on Sunday in Dar es Salaam.

In Kampala, The Guardian on Sunday has established that the monthly rent per square metre in the Central Business District has gone down to $17 from $20 three years ago, while in those classified as posh areas, it trades at $25 per square metres.

In Nairobi, Knight Frank (K) Ltd pegs prime rents for office space at $15 (Sh1,300) per square metre per month, with rental yields of nine per cent annually while prime retail space rental prices are pegged at $31 (Sh2,700) per square metre per month, with yields at 10 per cent a year.

In terms of construction cost per square metre, in Dar es Salaam it costs an average $250 depending on the design, quality and materials used; in Nairobi it costs $400 while in Kampala the cost stands at $640, according to figures gathered by the Guardian on Sunday.

According to reports by The South African Property Owners Association (Sapoa) and Investment Property Databank (IPD) released last year the prime office properties in Johannesburg locations including Illovo, Melrose/Waverley, Rosebank and Sandton and environs cost an average of $28 per square metres. The report further says that the most expensive offices in Cape Town cost an average of $22 per square metres.

Knight Frank’s Property Manager, Hussein told the Guardian in a telephone interview yesterday that the maximum rental office space on commercial grade for an office property in Dar es Salaam city has increased by 25 percent for the last three years.

He said within the period under review the renting for office space which is hired to clients by his company and charged in terms of the US Dollar, has increased from $15 to current $ 21 per square meter per month while the lowest has increased from $ 10 to $ 16 per square meter for the last three years.

These rates are slightly lower than what is being charged in other buildings on the outskirts of the city. For instance, at Mlimani city located in Mwenge, renting charges is measured at $ 38 per square metre.

However, Hussein has attributed the sudden increase as to have been exacerbated more by the recent introduction of a Value Added Tax (VAT) on property renting which started effectively during 2012/13 financial year.

In addition to these renting rates, clients in most properties have to pay a service charge of between $3 and $4 per square metre. This is for other expenses such as water, security, fumigation and refuse collection as well as land scaping with the exception of electricity and telephone charges.

Due to the increased scarcity of the office spaces however, some residential flats in prime areas of Dar es Salaam have been converted to commercial properties, and that this is happening because offices are scarce in the city’s central business district (CBD) in downtown Dar es Salaam, this is an aspect which has forced many people to look for offices in the city’s outskirts.

Areas that have been affected most include Upanga, Oyster Bay, Masaki, Mikocheni, Kinondoni and Sinza areas which are also increasingly becoming office blocks. According to the source, all prime office properties available at CBD are fully occupied. However, he further noted that the trend is set to increase in future as the scarcity of offices is increasing in the city.

Another real estate expert who spoke on condition of anonymity has noted that turning residential buildings into offices was contrary to regulations although the trend is a sign of the growth in the real estate industry. He said it was an indication that there was an influx of investors in the country, hence increasing the need of office space in most prime areas.

The other reasons might have been due to new companies’ expansions and the situation was contributing to the rising demand. However he added that high rate renting in Dar had become a problem as many people prefer having offices in the CBD where most government offices are located and where social services are provided reliably.

Meanwhile, an official with the Dar es Salaam based housing stakeholders commonly known as ‘Merchant Chamber’ has said that, there are an estimated 14 million people who spends approximately 40 percent of their income for rent housing mostly single rooms in urban areas in the country.

The organisation’s Secretary General Shaukat Jaffer told The Guardian on Sunday in an exclusive interview early this week in Dar es Salaam that, the high cost of renting a house is due to the shortage of 3 million housing units facing low income people in most towns and cities in the country.

He said that there was an annual average increase of 200,000 housing units in cities and towns in the country which does not suffice to cater for the need of the people in urban settlements.

But despite of this slow pace of real estate development, the cost of house rent is spiraling in the city of Dar es Salaam with house owners who keep on raising the cost of their house rents year after year. The survey can reveal that, houses in prime areas are hired at an exorbitant price rates than those in ordinary areas.

It has been noticed and carefully monitored with proof that, whenever the Tanzania Electricity Supply Company (TANESCO) rises the cost of their utility, owners of houses also finds a loophole to raise the cost of their houses on pretext that the power utility firm has increased the use of electricity.

The survey by this paper has discovered that, the cost of house rent in various city’s suburbs differs depending on the location of the house and its value. For example a house in Buguruni is rented differently compared to the one found in Kinondoni or Magomeni area.

The survey has discovered that renting a room closer to a central business area fetches a much higher rate than one in far-flung area, the reason being that the nearer to a central business the better the potential—owing to many opportunities including less expenditure on transportation.

It has been discovered that a house is hired at between Sh300,000 and Sh500,000 per month for middle class people and a single room is hired at between Sh30,000 and 80,000 in various parts of the city suburbs which shelter the low-income earners or over 60 percent of Dar’s population.

Most single rooms are affordable to low income people majority who are in the lower class. Most rooms in this category are found in slum settlements that cover about 75 percent of the total area of the city of Dar es Salaam.

The areas are Manzese, Kimara, Tegeta, Bunju, Sala Sala, Mwenge, Ubungo and Kawe which are in Konondoni district, Vingunguti, Kipawa, Uwanja wa Ndege, Jetty Lumo, Kinyerezi, Ukonga, Gongo la Mboto, Tabata, Segerea and Buguruni in Ilala district. Kurasini, Mbagala, Tandika, Temeke, Kigamboni and Mbagala in Temeke district. All, of these areas compose Dar es Salaam city.

All renting costs are exclusive of electricity and water supplies which are paid separately as additional expenses which a person who hires a house has to incur as operational costs.

To put things into perspective, Dar es Salam is expensive in terms of shelter and commercial houses. This situation plus the highest traffic jam, lack of infrastructures make Dar es Salaam an expensive place not only to live in but also to do business.

With very little money doled out as loans by local banks, property developers in Tanzania especially Dar es Salaam are forced to charge high rent to recover their investments as well as servicing the bank’s highest interests rates.

Interests rates, which is the cost of borrowing, stand between $17 and 20 percent depending on whether the borrower borrowed in US dollars or local currency.

As a result, currently the mortgage sector’s contribution to Tanzania’s Gross Domestic Product is below 1 percent, while Kenya it contributes about 7 percent. In South Africa the mortgage contribute about 25 percent of the GDP, while in the United States it equates 75 percent and in Europe its contribution stands at 25 percent. 

Source: https://www.ippmedia.com - By Emmanuel Onyango

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