Chronicle EditorKudzanai Sharara Assistant Property Editor
The unavailability of funds to sustain consistent mortgage lending is the biggest challenge affecting the provision of housing finance, the Zimbabwe Association for Housing Finance (ZAHF) has said. ZAHF said because of market volatility, the bulk of funds invested in mortgage lending institutions are demand deposits while, in stable environments, mortgage loans are serviceable over up to twenty-five years. It added that the high risk caused by this mismatch forces housing financiers to reduce lending periods.
“Prior to the hyper inflationary period, this problem was partly addressed by an incentive offered to individuals and corporates to make long term investments in Building Societies in the form Tax-Free Paid Up Permanent Shares (Class C PUPS). These were a form of fixed term deposits subject to notice and penalties for early withdrawal. Introduction of a similar instrument for institutions offering housing finance would improve the liquidity situation,” said ZAHF.
ZAHF also said another serious obstacle to the provision of housing finance at present is the unavailability of title in some urban areas saying banks and building societies require title deeds as security for the long term loans that they advance. Commenting on the challenges affecting the disposal of low-cost housing units, ZAHF said the high level of conveyance fees was the biggest challenge.
“It has been observed that the high level of conveyance fees, which combine lawyers’ fees and government stamp duty on property transfer and bond registration, is a major inhibition to home-ownership. The combined cost averages 7,8 percent of the acquisition cost of a property and has to be paid in cash up-front. After struggling to meet all other requirements, many aspiring home-owners have failed to proceed further when confronted by these costs.”
CABS has been struggling to sale its housing units in Budiriro several years after they were completed. Although focus is mainly on provision of low-cost housing and serviced residential stands, mortgage lenders are also responding to financing demand in the medium and low density areas where stand-alone and cluster homes are being constructed through projects undertaken by ZAHF member institutions. Further demand is also in response to the Diaspora market needs. Meanwhile, ZAHF criticised the current operating environment saying mortgage lenders need to be very selective and scrutinising before they offer advances.
“The formulae used in previous years to size up salaries and business performance figures against intended borrowings are largely no longer usable. Assessment of a potential borrower’s ability to repay is therefore a daunting task and is left to the respective Financiers’ risk appetite based on internal policies,” said ZAHF.
Online Reporter